ADVFN Logo

We could not find any results for:
Make sure your spelling is correct or try broadening your search.

Trending Now

Toplists

It looks like you aren't logged in.
Click the button below to log in and view your recent history.

Hot Features

Registration Strip Icon for alerts Register for real-time alerts, custom portfolio, and market movers

GABI Gcp Asset Backed Income Fund Limited

68.20
0.00 (0.00%)
Last Updated: 08:00:02
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Gcp Asset Backed Income Fund Limited LSE:GABI London Ordinary Share JE00BYXX8B08 ORD NPV
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.00% 68.20 67.60 70.80 59,776 08:00:02
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Trust,ex Ed,religious,charty 15.18M 7.69M 0.0181 37.68 290.28M

GCP Asset Backed Income Fund Ltd Annual Report & Financial Statements (3879C)

13/04/2017 7:00am

UK Regulatory


Gcp Asset Backed Income (LSE:GABI)
Historical Stock Chart


From Mar 2019 to Mar 2024

Click Here for more Gcp Asset Backed Income Charts.

TIDMGABI

RNS Number : 3879C

GCP Asset Backed Income Fund Ltd

13 April 2017

GCP Asset Backed Income Fund Limited (the "Company")

(formerly Project Finance Investments Limited)

13 April 2017

Annual report and financial statements for the period 7 September 2015 to 31 December 2016

The Directors of the Company are pleased to announce the Company's annual results for the period to 31 December 2016. The full annual report and financial statements can be accessed via the Company's website at http://www.gcpuk.com/gcp-asset-backed-income-fund-ltd/ and will be posted to shareholders over the course of the next few weeks.

For further information, please contact:

Gravis Capital Partners LLP +44 (0)20 7518 1490

   David Conlon                             david.conlon@gcpuk.com 
   Philip Kent                                  philip.kent@gcpuk.com 
   Dion Di Miceli                            dion.dimiceli@gcpuk.com 

Cenkos Securities plc +44 (0)20 7397 8900

   Tom Scrivens                             tscrivens@cenkos.com 
   Sapna Shah                               sshah@cenkos.com 
   Oliver Packard                           opackard@cenkos.com 

Buchanan +44 (0)20 7466 5000

   Charles Ryland                        charlesr@buchanan.uk.com 
   Victoria Watkins                      victoriaw@buchanan.uk.com 

Notes to Editors

The Company is a closed ended investment company traded on the Main Market of the London Stock Exchange. Its investment objective is to generate attractive risk-adjusted returns primarily through regular, growing distributions and modest capital appreciation over the long term.

About us

The Company seeks to meet its investment objective by making investments in a diversified portfolio of predominantly UK based asset backed loans which have contracted, predictable medium to long-term cash flows and/or physical assets.

The Company is a listed investment company focused primarily on asset-backed loans across a range of sectors predominantly in the UK.

The Company's investment objective is to generate attractive risk adjusted returns through regular, growing distributions and modest capital appreciation over the long term.

The Company is a closed-ended investment company incorporated in Jersey. It was admitted to the premium listing segment of the Official List and to trading on the LSE's Main Market on 23 October 2015, and since then it has grown to a market capitalisation of GBP175.9 million as at 31 December 2016.

AT A GLANCE AS AT 31 DECEMBER 2016

GBP175.9m

Market capitalisation

106.88p

Ordinary share price

14

Number of investments

GBP165.2m

Value of investments (including cash)

100p

NAV per ordinary share

11.2%

Total shareholder return for the period

GBP7.2m

Profit for the period

5.82p

Dividends for the period(1)

(1) Includes a dividend of 1.5 pence per share for the quarter to 31 December 2016 which was declared post period end.

HIGHLIGHTS FOR THE PERIOD

   --     GBP106 million raised at IPO in October 2015 

-- IPO proceeds deployed quicker than anticipated resulting in the first dividend being brought forward by three months and first-year target annualised dividend being increased from 4 pence per share to 5 pence per share

-- GBP44.1 million raised through the issuance of C shares in May 2016 and a further GBP15.6 million though a placing of ordinary shares in November 2016

   --     Profit for the period of GBP7.2 million 

-- Dividends of 4.32 pence per share paid for the period from IPO to 30 September 2016 and 1.5 pence per share for the quarter to 31 December 2016, paid on 21 February 2017

-- Diversified portfolio of 14 asset-backed loans with a third party valuation of GBP158.3 million

-- Fair value valuation of the Company's investment in the Subsidiaries' portfolio, of GBP158.4 million, with cash balances of GBP6.8 million at 31 December 2016

   --     Company NAV per ordinary share of 100 pence as at 31 December 2016 
   --     Ordinary shares trading at a 6.9% premium to NAV as at 31 December 2016 
   --     Total loans of GBP14.7 million advanced post period end 

-- Post period end, a further GBP79.3 million raised through the issuance of C shares in February 2017

   --     Total shareholder return for the period of 11.2% 

INVESTMENT OBJECTIVES

The Group invests in a diversified portfolio of fixed and floating rate loans secured against contracted, predictable medium to long-term cash flows and/or physical assets to meet the following key objectives:

Attractive risk adjusted returns

To provide shareholders with returns that are attractive with regard to both the level of return achieved and the risk taken.

The Company invests in a diversified portfolio of loans secured against contracted medium to long-term cash flows and/or physical assets.

The Company has invested in a diversified portfolio of loans secured against contracted medium to long-term cash flows and/or physical assets.

Regular, growing distributions

To provide shareholders with regular and growing dividend distributions.

The Company exceeded its target dividend yield of 4% as set out at IPO, met its revised target dividend yield of 5% for the first full financial year and has established a run-rate over the previous three quarters of an annualised dividend yield of 6%.(1)

Capital appreciation

To achieve modest appreciation in shareholder value over the long term.

Since inception, the Company's ordinary shares have traded at a premium to NAV. The Company's NAV per share has grown from 98 pence at IPO to 100 pence at the period end. The Company's ordinary shares were trading at 106.88 pence at the period end.

Key performance highlights

 
Number of investments as at 31 December 2016                                          14 
Weight adjusted average annualised yield on investment portfolio                    8.2% 
Dividend for period ended 31 December 2016                                         5.82p 
Percentage of portfolio with interest rate protection and/or inflation linkage     c.60% 
Share price of ordinary shares as at 31 December 2016                            106.88p 
Total shareholder return for the period                                            11.2% 
-------------------------------------------------------------------------------  ------- 
 

(1) Information in relation to dividends set out above is for illustrative purposes only and is not intended to be, and should not be taken as, a profit forecast or estimate.

CHAIRMAN'S STATEMENT

Introduction

On behalf of the Board, I am pleased to present the Company's first annual report and financial statements following a successful period since IPO in October 2015. In the period, the Company raised c.GBP166 million through equity issuances and invested GBP159.6 million in 14 loans that continue to perform in line with expectations. It is pleasing to note that the Investment Manager deployed capital raised expeditiously and at attractive rates enabling the Company to exceed its stated IPO dividend target in respect of this first initial period by 25%, with dividends totalling 5.82 pence per ordinary share paid and declared for the period.

The Company was established to meet a market need for bespoke lending products that are tailored to a borrower's specific requirements in areas of the market that are currently underserved by mainstream lenders. It invests in a diversified portfolio of investments which are secured against contracted, predictable medium to long-term cash flows and/or physical assets. The Investment Manager focuses primarily on loans secured against assets that are integral to society in sectors such as energy, waste, social infrastructure and property.

The Board is grateful for shareholders' support for the Company and is pleased to have established a broad and diversified shareholder register. Inclusion in the FTSE All-Share Index in June 2016 has further enhanced market liquidity of the Company's ordinary shares in the secondary market.

Market overview

Market conditions remain supportive to the Company's strategy with the low interest rate environment continuing to make the Company's ability to generate regular income attractive for investors. Approximately 60% of the Company's investment portfolio benefits from either inflation linkage or interest rate protection, a characteristic that acts as a mitigation against concerns regarding inflation and interest rates.

Tightening regulatory capital controls are forcing mainstream lenders to hold more equity capital against their risk-weighted assets or to reduce the value of these assets on their balance sheets. This has resulted in bank lenders becoming more restricted regarding the sectors that they will lend against and the loan covenants, term and size they are prepared to accept. These lending decisions, driven by regulatory factors and not based on an analysis of the credit quality of end borrowers, have created opportunities for alternative lenders.

Furthermore, bespoke lending opportunities that sit outside of standard credit products tend to require significant expertise to analyse investment risk and to structure transactions that address specific borrower requirements. The investment process can be resource intensive and mainstream lenders generally prefer to focus on simpler areas of the market. The Company on the other hand has the required experience and personnel to understand comprehensively relatively complicated investment opportunities, perform the necessary due diligence and tailor a flexible lending product to meet a borrower's needs.

This approach to lending means the Company and its shareholders can continue to benefit from the many gaps left by mainstream lenders. The Investment Manager continues to see substantial asset-backed finance investment opportunities with a pipeline of suitable investments in the near term of c.GBP168 million.

NAV and share price performance

At the period end, the net assets of the Company were GBP164.6 million. The NAV per ordinary share increased from 98 pence immediately following the Company's IPO to 100 pence at 31 December 2016. The Company's ordinary shares have traded at a premium to NAV since inception, with an average premium over the period of 7.1%. At 31 December 2016, the share price for the ordinary shares was 106.88 pence.

Dividend policy

The Company paid dividends in respect of the financial period to 31 December 2016 of 5.82 pence per ordinary share, thereby meeting its revised IPO target annualised yield of 5% for that period. Looking forward, the Company is targeting an annual dividend of 6 pence per ordinary share.(1)

(1) Information in relation to dividends set out above is for illustrative purposes only and is not intended to be, and should not be taken as, a profit forecast or estimate.

Scrip dividend facility

A resolution will be put to shareholders at the forthcoming AGM to propose the introduction of a scrip dividend facility. The proposed scrip dividend facility will give ordinary shareholders the opportunity to elect to receive new ordinary shares, these being scrip shares, in the Company in place of their cash dividend payments.

The scrip dividend facility will enable ordinary shareholders to increase their holding in the Company without incurring dealing costs, while the Company benefits from the retention of cash, which would otherwise be paid out as a dividend. Shareholders should consult their own professional tax advisers in relation to the tax consequences of electing to receive any scrip shares.

Subject to approval of the relevant resolution by shareholders, it is intended that the scrip dividend facility will enable ordinary shareholders to elect for scrip shares in place of their cash dividend with effect from the quarterly dividend for the period ended 30 June 2017. Further details will be published by the Company at the appropriate time.

Company name change

With effect from 12 October 2016, the Company changed its name to GCP Asset Backed Income Fund Limited following approval by shareholders at the 2016 AGM. The Board believes that the revised name more accurately reflects the Company's investment approach of making loans secured against a diversified portfolio of asset-backed, income generative investments.

Governance and compliance

The Board recognises the importance of a strong corporate governance culture and continues to maintain principles of good corporate governance as set out in the UK Code, which was updated in April 2016. A copy of the UK Code is available at www.frc.org.

Alex Ohlsson

Chairman

12 April 2017

STRATEGIC OVERVIEW

Investment objectives and policies

The Company's investment objective is to generate attractive risk adjusted returns through regular, growing distributions and capital appreciation over the long term.

The Company will seek to meet its investment objective by making investments in a diversified portfolio of asset-backed loans. The Company's investments are predominantly in the form of medium to long-term fixed or floating rate loans which are secured against cash flows and/or physical assets which are predominantly UK based.

The Company's asset-backed investments will typically be unquoted and will include, but not be limited to, senior loans, subordinated loans, mezzanine loans, bridge loans and other debt instruments. The Company may also make limited investments in equities, equity-related derivative instruments such as warrants, controlling equity positions (directly or indirectly) and/or directly in physical assets.

The Company currently anticipates that it will make investments directly or indirectly through one or more underlying special purpose vehicles which will typically be wholly owned by the Company and over which the Company will exercise control as regards to investment decisions. The Company may from time to time invest through vehicles which are not wholly owned by it. In such circumstances, the Company will seek to secure controlling rights over such vehicles through loan agreements or other legal arrangements.

The Company will at all times invest and manage its assets in a manner which is consistent with the objective of spreading investment risk.

Investment restrictions

The Company will observe the following investment restrictions:

-- any single investment, or any investments with a single counterparty, will be limited to 20% of the gross assets of the Company;

-- investments in equities and equity-related derivative instruments including controlling equity positions and any direct investments in physical assets will be limited to 10% of the gross assets of the Company;

-- no more than 20% of the gross assets of the Company will be invested in projects and assets outside the UK; and

   --     the Company will not invest in other listed closed-ended funds. 

The limits set out above shall all apply as at the time of investment, as appropriate.

Non-financial objectives of the Company

The key non-financial objectives of the Company are:

-- to maintain strong and positive working relationships with all stakeholders, including shareholders and borrowers; and

-- to promote the development of emerging asset-backed sectors by developing financial products that match the requirements of the sector.

Key policies

Borrowing and gearing policy

The Company may, from time to time, use borrowings for investment purposes, to manage its working capital requirements or in order to fund the market purchase of its own shares. Gearing, represented by borrowings, will not exceed 25% of NAV, calculated at the time of borrowing.

Hedging and derivatives

The Company may invest through derivatives for investment purposes and efficient portfolio management. In particular, the Company may engage in interest rate hedging or otherwise seek to mitigate the risk of interest rate changes as part of the Company's efficient portfolio management.

Dividend policy

The Company intends to pay dividends on a quarterly basis with dividends declared in January, April, July and October and paid in February, May, August and November in each financial year.

Target returns

The Company will target an IRR of between 7% and 8% (net of expenses and fees) on the IPO price over the long term.(1)

Conflicts of interest

Where there is any overlap for a potential investment with GCP Infrastructure (a third-party company advised by the Investment Manager), GCP Infrastructure has a right of first refusal over such investment.

In the event that the Investment Manager or any partners, directors, officers or employees of the Investment Manager are directly or indirectly interested in any entity or asset in relation to any investment proposal, the potential investment is presented to the Board for its approval.

As disclosed in the prospectus published on 20 January 2017, the partners of the Investment Manager indirectly own an equity interest in two of the Company's investments, details of which can be found on page 19 under the heading 'Conflicts of interest'.

(1) Information in relation to the IRR set out above is for illustrative purposes only and is not intended to be, and should not be taken as, a profit forecast or estimate.

Delivery of investment objectives through implementation of investment strategy

 
Investment objective      Implementation of investment strategy 
------------------------  ---------------------------------------------- 
Attractive risk           Investments in sectors being underserviced 
 adjusted returns          by mainstream lenders 
 To provide shareholders   The Company targets investments 
 with returns that         in asset classes that are not serviced 
 are attractive            by mainstream lenders, for which 
 with regard to            there exists a surplus of capital 
 both the level            demand over supply. This may be 
 of return achieved        due to scale, sector, tenure or 
 and the risk taken.       other restrictions driven by internal 
                           lender policies and/or regulatory 
                           constraints. Less competition to 
                           service these sectors means the 
                           Company can demand a premium over 
                           the risk being taken. 
                          ---------------------------------------------- 
                          Creation of bespoke lending products 
                           The Company focuses on addressing 
                           a borrower's needs through designing 
                           lending products that meet a specific 
                           financing requirement. The origination 
                           and structuring activities associated 
                           with this approach is resource intensive, 
                           requiring specific risk analysis, 
                           the development of documentation 
                           and bespoke financial analysis in 
                           each case. The Company's ability 
                           to invest such resource to meet 
                           a borrower's requirements justifies 
                           an additional premium relative to 
                           the underlying risk of an asset. 
                          ---------------------------------------------- 
                          Diversification of sectors 
                           The Company benefits from having 
                           a wide investment mandate, allowing 
                           it to be flexible in seeking investments 
                           in sectors that produce the most 
                           attractive risk/return profile. 
                           This means that to the extent particular 
                           sectors mature and the cost of capital 
                           available to such sectors falls, 
                           the Company is able to seek new 
                           areas that meet its return targets. 
                          ---------------------------------------------- 
                          Established investment process and 
                           due diligence 
                           The Investment Manager has significant 
                           experience in identifying, reviewing 
                           and conducting due diligence on 
                           new investment opportunities. Where 
                           appropriate, the Company engages 
                           third-party, independent, specialist 
                           advisers on each transaction to 
                           complement the Investment Manager's 
                           analysis in order to ensure the 
                           legal, market, credit, technical, 
                           insurance, finance, tax and regulatory 
                           aspects of each transaction are 
                           correctly considered. 
                          ---------------------------------------------- 
                          Structural separation of risks in 
                           investment structure 
                           The Company uses an established 
                           model of structuring investments, 
                           taken from project finance. This 
                           approach involves the detailed identification 
                           of the risks associated with owning 
                           an asset and the monetisation of 
                           the goods and/or services produced 
                           by an asset. The asset, together 
                           with the key licences and consents 
                           required to monetise such asset, 
                           are owned by a newly formed company 
                           with the specific purpose of holding 
                           this asset. Where appropriate, third 
                           party service providers are engaged 
                           to manage these risks through contractual 
                           arrangements with the Project Company. 
                           This results in a structure where 
                           the residual risks associated with 
                           investing in the asset company are 
                           clearly delineated and are well 
                           understood. 
                          ---------------------------------------------- 
                          Investments in debt 
                           The Company's investments are primarily 
                           in debt structures secured against 
                           the value of the physical asset 
                           and contractual relationships generating 
                           revenues from the sale of services 
                           and/or goods produced by such asset. 
                           Secured debt structures give the 
                           Company layers of protection in 
                           the event an asset underperforms, 
                           with the ultimate ability to take 
                           control over an asset or the company 
                           with asset ownership to protect 
                           the value of an investment. 
                          ---------------------------------------------- 
                          Delivery of investment objective 
                           The Company has generated risk-weighted 
                           returns to shareholders in excess 
                           of investments with an equivalent 
                           risk profile. 
                          8% 
                           Weighted average discount rate(1) 
                           11.2% 
                           Total shareholder return for the 
                           period 
------------------------  ---------------------------------------------- 
Regular, growing          Cash flows from assets that create 
 distributions             goods or services for which a structural 
 To provide shareholders   demand exists 
 with regular and          The Company's ability to pay a regular 
 growing dividend          dividend is supported by investments 
 distributions.            in assets that create medium to 
                           long-term cash flows. These cash 
                           flows are supported by a structural 
                           demand for the goods or services 
                           produced by an asset. For example, 
                           the Company's investment in social 
                           housing creates a regular income 
                           underpinned by an asset providing 
                           a service to society for which there 
                           is a structural and enduring demand. 
                           Similarly, the domestic boilers 
                           funded by the Company produce a 
                           regular income supported by the 
                           critical nature of a boiler in an 
                           individual's home. 
                          ---------------------------------------------- 
                          Medium to long-term capital 
                           When making investments, the Company 
                           ensures capital is deployed effectively 
                           and remains income generating for 
                           the duration of an investment. The 
                           Company intends to balance amortising 
                           loans with bullet repayments, to 
                           allow capital repayments and associated 
                           reinvestment requirements to be 
                           predictable. Further, the Company 
                           typically restricts early or "voluntary" 
                           repayment of loans. To ensure the 
                           higher income levels are maintained 
                           for as long as possible, the Company 
                           has the ability to secure through 
                           investment of resource in an emerging 
                           sector or to create bespoke products. 
                          ---------------------------------------------- 
                          Delivery of investment objective 
                           The Company has increased its annualised 
                           dividend target for the first year 
                           from 4 pence per share to 5 pence 
                           per share and generated positive 
                           profitability in the period. 
                          5.82p 
                           Dividends paid or declared for the 
                           period ended 31 December 2016 
                           GBP7.2 million 
                           Profit for the period 
------------------------  ---------------------------------------------- 
Capital appreciation      Income generation in excess of dividends 
 To achieve modest         and costs 
 appreciation in           In the 14 months since the Company's 
 shareholder value         IPO, the Company has established 
 over the long term.       a run-rate of income generation 
                           in excess of its aggregate costs 
                           and target dividend payment. This 
                           has been shown in the growth of 
                           the NAV since IPO. 
                          ---------------------------------------------- 
                          Inflation linkage 
                           Approximately 60% of the Company's 
                           portfolio has an element of inflation 
                           linkage, creating income that grows 
                           either directly with inflation or 
                           in the event that inflation exceeds 
                           a particular level. Long-term inflation 
                           assumptions are not factored into 
                           quarterly valuations and therefore 
                           there is potential for NAV growth 
                           in the medium to long-term. 
                          ---------------------------------------------- 
                          Equity upsides 
                           Where possible, the Company seeks 
                           to build equity upside into its 
                           investments. Whilst the primary 
                           investment in all cases remains 
                           debt based, maintaining the investment 
                           disciplines and downside protection 
                           this provides, where such debt is 
                           materially contributing to the growth 
                           of a business it is reasonable for 
                           the Company to seek additional equity 
                           style upside. This may be achieved 
                           through nominal equity holdings, 
                           share warrants, or profit sharing 
                           mechanisms on interest rates. 
                          ---------------------------------------------- 
                          Delivery of investment objective 
                           The Company's NAV per share has 
                           grown from 98 pence at IPO to 100 
                           pence as at the period end. 
                           100p 
                           NAV per ordinary share as at 31 
                           December 2016 
                           2% 
                           NAV growth since IPO 
------------------------  ---------------------------------------------- 
 

(1) The weighted average discount rate is the weighted average of the discount rates adopted by the independent Valuation Agent to value the portfolio of assets, taking into account the various factors that may impact the risk profile of the loan.

ASSET-BACKED LING

Asset-backed lending overview

Asset-backed lending is an approach to structuring investment that is used to fund infrastructure, industrial or commercial projects, asset financing and equipment leases. Asset-backed lending relies on (i) the intrinsic value of physical assets; and/or (ii) the value of long-term, contracted cash flows generated from the sale of goods and/or services produced by an asset; to create security against which investment can be provided.

Asset-backed lending is typically provided to a Project Company, which is a special purpose company established with the specific purpose of owning and operating an asset. Financing is provided to the Project Company with recourse solely to the assets of that Project Company and distributions to service loans or other financing relies on the monetisation of the goods and/or services such asset provides. Lenders implement a security structure that allows them to take control of the Project Company and assume the benefits of the asset and service contracts if the Project Company has difficulties complying with financing terms.

Typically, an asset-backed lending structure involves a number of counterparties, who enter into contractual relationships with the Project Company that apportion value and risk through providing services (e.g. operations and maintenance) associated with the development, ownership and/or operations of an asset. In structuring an asset-backed loan, the Project Company will seek to ensure risks (and associated value) are apportioned to those counterparties best able to manage them. This ensures the effective pricing and management of risks inherent in the asset.

The benefits associated with asset-backed debt investments

Investment in asset-backed loans offers relatively secure and predictable returns to their lenders, when compared with corporate lending. Further, the reduction since 2007 in the availability of mainstream debt (primarily from banks) has created the potential for more attractive pricing on debt investments particularly where such investments have been originated and structured to accommodate the borrowers' specific requirements. In particular, where borrowers may not have access to mainstream financing for reasons other than the creditworthiness of the relevant project, such as loan size, tenure, structure or an understanding of the underlying cash flows and/or asset, attractive rates are available for those willing to commit the resource, innovation and time to understanding and identifying a solution for a specific borrower's requirements.

A key benefit arising from the Investment Manager's approach to asset-backed lending is transparency. A loan secured against a specific asset (within a company established specifically for that asset) is capable of analysis broadly by reference to a set of known variables such as:

   --     how an asset generates cash flow; 
   --     its current value; 
   --     expected future value; 
   --     the competence of its service providers; and 
   --     the availability of alternative service providers in the event of operator failure. 

By contrast, a corporate loan tends to be analysed by reference to its last reporting date, and thus such an analysis is out of date by definition; moreover, the impact of unforeseeable variables (such as the leveraged buyout of a previously investment grade credit), any off balance sheet liabilities or specific business risks may render any such analysis wholly irrelevant in a short space of time.

The need to fully understand the risks associated with a given asset, and structure arrangements with experienced service providers to effectively manage those risks, requires specialist skills and resources. For this reason, the Company's target market remains underserviced by mainstream lenders therefore offering an attractive risk-adjusted return for parties with relevant experience and access to the required resources.

The increased volatility in equity markets seen post the Brexit vote, and the uncertainty the Brexit process creates, is expected to reinforce the attractiveness of investing in assets that have the ability to generate contracted, long-term, predictable cash flows over the medium and long term.

MARKET OUTLOOK

Target sector updates

Social infrastructure

The Company continues to see opportunities in assets that provide a core service to society, such as social housing, care for the elderly and student accommodation. These investments are supported by a structural excess of demand for a service over the supply in a certain geography. For example, London is estimated to have c.70,000 dedicated student beds compared with c.370,000 students. Similarly, local authorities continue to have an obligation to provide housing for vulnerable adults, and the Company has financed a number of developments with housing associations in locations with an undersupply of such provision. Due to the high quality nature of the credit opportunity in these sectors, the Company has seen increased competition for new opportunities, with significant capital raised in funds targeting social housing and large institutions committing financing to this sector. The Company's response will be to continue to seek attractive opportunities in the social infrastructure space where such competition is not occurring due to the stage of maturity or scale of investment required, such as the provision of temporary emergency accommodation for local councils and short-term community developments in under-utilised inner-city locations.

Energy and associated infrastructure

The UK continues to experience a number of pressures on energy generation and consumption, driven by the "trilema" of balancing cost, energy security and the green agenda. Reductions in feed-in-tariffs and the move to the contract for difference mechanism will favour certain technologies, with nuclear and offshore wind expected to be the main beneficiaries of future direct government support.

Alongside this, the UK government continues to promote renewable heat and the evolution of a 'smart grid', through the deployment of smart meters and the promotion of generation and demand side services through the system operator (National Grid), such as grid frequency response and energy storage. Energy efficiency continues to be an economically viable investment for commercial and industrial enterprises in the absence of subsidies where sufficient scale can be aggregated across a number of sites. Further, the UK continues to lag behind its European counterparts in the volume of waste sent to landfill, creating opportunities to generate income as an alternative to paying landfill tax in waste uses for energy generation or other recycling and recovery applications.

Asset finance

The asset finance sector continues to be competitive, with established finance providers active in the financing of well understood and common assets, such as vehicles and electronic goods. The Company targets opportunities in more niche assets that require bespoke analysis due to the asset type or the circumstances of the asset, such as domestic boiler financing.

Property

The Company has identified certain areas of the residential mortgage sector that are being underserved by mainstream lenders for reasons other than credit quality. In particular, short-term bridge finance for property purchases and developments has been an area the Company has been able to secure attractive interest rates at conservative LTV ratios against a diverse pool of assets. The Company has developed strong relationships with a number of bridge finance providers.

Specialist lending

The specialist lending market has experienced a reduction in the lending activity of mainstream credit providers. This reduction has been driven by requirements on banks to increase equity capital ratios as part of legislation such as Basel III and the periodic stress testing of the banking sector. Improvements to equity ratios are achieved either through building additional equity reserves, by attracting investment or through reducing dividends; or reducing the risk-weighted assets on a bank's balance sheet, achieved through:

   (i)   the realisation of impairments; 

(ii) a move to investments in lower risk assets (demonstrated by reductions in investment banking activities); or

(iii) a reduction in lending activities in certain sectors and/or tightening of financial covenants (such as LTV ratios) in remaining sectors.

It is this final area that has created, and will continue to create, an opportunity for the Company. The withdrawal of mainstream lenders from certain sectors, or a tightening of lending terms, has led to these credit opportunities facing a surplus of demand for capital over supply for reasons other than the credit quality of the lending proposition. The market response has been the emergence of challenger banks, peer-to-peer lenders and investment companies (such as the Company) seeking to redress this imbalance.

Investment pipeline

The Investment Manager maintains a pipeline of potential investments on behalf of the Company. At the end of the period, the pipeline represented c.GBP168 million of new opportunities. The Investment Manager continues to market and originate new opportunities through its network of developers and advisers and the Investment Manager continues to see attractive investment opportunities across a variety of sectors, including energy, social infrastructure, waste and specialist property.

REVIEW OF THE PERIOD

Financial performance

The Company has prepared its annual report and financial statements in accordance with IFRS.

In the period to 31 December 2016, the Company's portfolio generated investment income of GBP9.7 million. Total profit for the period was GBP7.2 million, with earnings per ordinary share of 6.91 pence and diluted earnings per ordinary share of 6.12 pence. The Company's ongoing charges percentage, a measure expressed as a percentage of NAV, of the regular, recurring costs of running an investment company was 1.03% for the period from IPO to 31 December 2016.

The Company paid dividends totalling 4.32 pence per share for the period from IPO to 30 September 2016 with a further dividend of 1.5 pence per share for the quarter to 31 December 2016 paid on 21 February 2017.

Cash position

The Company received interest payments of GBP8.4 million from investments and capital repayments of GBP1.8 million in the period, in line with expectations. The Company paid dividends of GBP5.2 million during the period and a further GBP2.5 million post period end.

The Company raised GBP165.7 million of equity capital and made investments of GBP159.6 million. Total cash reserves at the period end were GBP6.8 million.

Capital raised

The Company raised GBP106 million at IPO issuing 106,000,000 ordinary shares at an issue price of 100 pence per share. On 24 May 2016, the Company raised GBP44.1 million by way of an open offer, placing and offer for subscription of 44,086,270 C shares at an issue price of 100 pence per share. On 2 November 2016, the Company raised a further GBP15.6 million by way of a non-pre-emptive placing of 14,964,734 ordinary shares at an issue price of 104.5 pence per share. Post period end, on 10 February 2017, the Company raised GBP79.3 million by way of an open offer, placing and offer for subscription of 79,250,000 C shares at a price of 100 pence per share.

NAV and share price performance

Net assets attributable to equity holders at 31 December 2016 were GBP164.6 million, up from GBP105.4 million at 30 June 2016. The Company's NAV per ordinary share has increased from 98 pence at IPO to 100 pence per ordinary share as at 31 December 2016, a 2% increase since IPO.

The Company's ordinary shares have traded at a premium to the latest published prevailing NAV since IPO, with an average premium over the financial period of 7.1%. At 31 December 2016, there were 164,612,083 ordinary shares in issue.

Conflicts of interest

On 24 August 2016, the Company announced an investment of GBP13.5 million to finance the construction project of a private student residential accommodation development located adjacent to Queen Mary University of London.

On 16 December 2016, the Company announced an investment of GBP15 million to finance the construction project of six private student accommodation developments in Australia.

As set out in the prospectus published on 20 January 2017, the partners of the Investment Manager indirectly own an equity interest in these two development projects. In accordance with the Company's investment approval process, these investments were reviewed and approved by the Board.

Key investment highlights

The Company made 14 investments during the period totalling GBP159.6 million: three investments in the energy and infrastructure sector; one in asset finance; three property investments and seven investments in social infrastructure projects. The Company received capital repayments of GBP1.8 million, in line with expectations for the period. The Company made a further four investments totalling GBP14.7 million post period end.

Investments made during the period

 
Investment             Loan                              Project 
---------------------  ---------  ---------------------  ---------------------------- 
Bridging Co 1 ("BC1")  Amount     GBP20.3 million        Bridge financing 
                        Term       7 years                for the purchase 
                        Security   Senior                 of UK residential 
                        Status     Operational            property. 
---------------------  ---------  ---------------------  ---------------------------- 
Boiler Co ("BC")       Amount     GBP15.6 million        The financing of 
                        Term       10 years               new domestic gas 
                        Security   Senior                 boilers in residential 
                        Status     Operational            properties across 
                                                          the UK. 
---------------------  ---------  ---------------------  ---------------------------- 
Waste Infra. Co        Amount     GBP14.5 million        The construction 
 ("WIC")                Term       15 years               of a materials 
                        Security   Senior                 recovery facility 
                        Status     Construction           near Heathrow, 
                                                          London. 
---------------------  ---------  ---------------------  ---------------------------- 
Bridging Co 2 ("BC2")  Amount     GBP13.0 million        Bridge financing 
                        Term       5 years                for the purchase 
                        Security   Senior                 of UK residential 
                        Status     Operational            property. 
---------------------  ---------  ---------------------  ---------------------------- 
Development Finance    Amount     GBP12.0 million        Short-term financing 
 Co ("DF")              Term       5 years                for the development 
                        Security   Senior                 of UK residential 
                        Status     Operational            property. 
---------------------  ---------  ---------------------  ---------------------------- 
Care Homes Co 1        Amount     GBP11.3 million        The construction 
 ("CHC1")               Term       20 years               of a care home 
                        Security   Senior                 providing high-end 
                        Status     Construction           nursing and dementia 
                                                          care in the UK. 
---------------------  ---------  ---------------------  ---------------------------- 
O&M Co ("O&M")         Amount     GBP10.7 million        The financing of 
                        Term       15 years               the operations 
                        Security   Senior                 and maintenance 
                        Status     Operational            contracts for a 
                                                          portfolio of small 
                                                          rooftop solar installations 
                                                          based in the UK. 
---------------------  ---------  ---------------------  ---------------------------- 
Asset Finance Co       Amount     GBP11.5 million        The financing of 
 ("AFC")                Term       18 years               small distributed 
                        Security   Senior                 assets such as 
                        Status     Operational            wind turbines and 
                                                          biomass boilers 
                                                          based in the UK. 
---------------------  ---------  ---------------------  ---------------------------- 
Social Housing Co      Amount     GBP10.5 million        The acquisition 
 ("SH")                 Term       21 years               and refurbishment 
                        Security   Senior                 of residential 
                        Status     Operational            housing in the 
                                                          UK to accommodate 
                                                          high-dependency 
                                                          adults through 
                                                          an "assisted living" 
                                                          model. 
---------------------  ---------  ---------------------  ---------------------------- 
Student Accom Co       Amount     GBP14.0 million        Financing of a 
 1 ("SA1")              Term       2 years                construction project 
                        Security   Subordinated           for a private student 
                        Status     Construction           residential accommodation 
                                                          in London. 
---------------------  ---------  ---------------------  ---------------------------- 
Care Homes Co 2        Amount     GBP12.8 million        The construction 
 ("CHC2")               Term       20 years               of a UK based care 
                        Security   Senior                 home providing 
                        Status     Construction           high-end nursing 
                                                          and dementia care. 
---------------------  ---------  ---------------------  ---------------------------- 
Social Co 1 ("S1")     Amount     GBP2.6 million         Financing of multi-use 
                        Term       3.5 years              social infrastructure 
                        Security   Senior                 development in 
                        Status     Construction           London. 
---------------------  ---------  ---------------------  ---------------------------- 
Student Accom Co       Amount     GBP8.0 million         Financing of a 
 2 ("SA2")              Term       5 years                portfolio of six 
                        Security   Subordinated           private student 
                        Status     Construction           accommodation developments 
                                                          in Australia. 
---------------------  ---------  ---------------------  ---------------------------- 
Property Co ("PC")     Amount     GBP2.8 million         Financing of three 
                        Term       20 years               supported living 
                        Security   Senior                 developments and 
                        Status     Construction           a high-specification 
                                                          complex care facility 
                                                          in the UK. 
---------------------  ---------  ---------------------  ---------------------------- 
                                  Investments totalling 
                                   GBP159.6 million 
---------------------  ---------  ---------------------  ---------------------------- 
 

Capital repayments in the period

 
Investment        Loan                        Project 
----------------  ------  ------------------  ---------------------------- 
Boiler Co ("BC")  Amount  GBP1.2 million      The financing of 
                                               new domestic gas 
                                               boilers in residential 
                                               properties across 
                                               the UK. 
----------------  ------  ------------------  ---------------------------- 
O&M Co ("O&M")    Amount  GBP0.4 million      The financing of 
                                               the operations 
                                               and maintenance 
                                               contracts for a 
                                               portfolio of small 
                                               rooftop solar installations 
                                               based in the UK. 
----------------  ------  ------------------  ---------------------------- 
Asset Finance Co  Amount  GBP0.2 million      The financing of 
 ("AFC")                                       small distributed 
                                               assets such as 
                                               wind turbines and 
                                               biomass boilers 
                                               in the UK. 
----------------  ------  ------------------  ---------------------------- 
                          Capital repayments 
                           totalling GBP1.8 
                           million 
----------------  ------  ------------------  ---------------------------- 
 

Investments made post period end

 
Investment             Loan                          Project 
---------------------  ---------  -----------------  ---------------------- 
Social Housing Co      Extension  GBP3.1 million     The acquisition 
 ("SHC")                                              and refurbishment 
                                                      of residential 
                                                      housing based in 
                                                      the UK to accommodate 
                                                      high-dependency 
                                                      adults through 
                                                      an "assisted living" 
                                                      model. 
---------------------  ---------  -----------------  ---------------------- 
Bridging Co 3 ("BC3")  Amount     GBP2.5 million     Bridge financing 
                        Term       5 years            for the purchase 
                        Security   Senior             of UK residential 
                        Status     Operational        property. 
---------------------  ---------  -----------------  ---------------------- 
Property Co 2 ("PC2")  Amount     GBP5.3 million     The financing of 
                        Term       3 years            a portfolio of 
                        Security   Subordinated       co-living properties 
                        Status     Construction       in London. 
---------------------  ---------  -----------------  ---------------------- 
Property Co 3 ("PC3")  Amount     GBP3.8 million     The financing of 
                        Term       3 years            a portfolio of 
                        Security   Subordinated       buy-to-let mortgages 
                        Status     Operational        in the UK. 
---------------------  ---------  -----------------  ---------------------- 
                                  Investments 
                                   made post period 
                                   end totalling 
                                   GBP14.7 million 
---------------------  ---------  -----------------  ---------------------- 
 

INVESTMENT PORTFOLIO

Investment portfolio

The valuation of the Group's 14 investments at 31 December 2016 was GBP158.3 million.

The Group's investments are supported by assets geographically located across the UK and Australia and exposed to a diverse range of asset types and sectors. As at 31 December 2016, the weight-adjusted average annualised yield was 8.2% across the portfolio with a weighted average expected term of twelve years. Seven of the loans have been advanced to companies with operating assets. The remaining seven loans have been advanced to companies with assets under construction.

Key exposures

 
Top ten investments 
--------------------  --------------------------  ----------------------  ---------- 
Loan                  Sector                      Asset                   % of total 
                                                                              assets 
--------------------  --------------------------  ----------------------  ---------- 
Bridging Co 1 
 ("BC1")              Property                    Residential property         12.3% 
Waste Infra.                                      Material recovery 
 Co ("WIC")           Energy and infrastructure    facility                     8.8% 
Boiler Co ("BC")      Asset finance               Domestic boilers              8.8% 
Student Accom 
 1 ("SA1")            Social infrastructure       Student accommodation         8.5% 
Bridging Co 2 
 ("BC2")              Property                    Residential property          7.9% 
Care Homes Co 
 2 ("CHC2")           Social infrastructure       Care home                     7.8% 
Development Fin 
 ("DF")               Property                    Residential property          7.3% 
Asset Finance 
 Co ("AFC")           Energy and infrastructure   Various                       7.0% 
Care Homes Co 
 1 ("CHC1")           Social infrastructure       Care home                     6.9% 
Property Co ("PC")    Social infrastructure       Social housing                6.5% 
--------------------  --------------------------  ----------------------  ---------- 
 

Investment valuation

The Valuation Agent carries out a fair market valuation of the Company's investments on behalf of the Board on a quarterly basis. The valuation principles used by the Valuation Agent are based on a discounted cash flow methodology. A fair value for each asset acquired by the Company is calculated by applying a discount rate (determined by the Valuation Agent) to the cash flow expected to arise from each asset.

The weighted average annualised discount rate across the portfolio as at 31 December 2016 was 8%. The valuation of investments is sensitive to changes in discount rates applied. Sensitivity analysis detailing the impact of a change in discount rates is given in note 17.3.

Portfolio performance

All investments are closely monitored by the Investment Manager, against strict reporting and information requirements as set out in the investment documentation.

The portfolio is performing well and there are no material issues to report. The assets under construction are all proceeding materially on time and budget, with a number of important milestones in relation to the completion of ground works passed in the period.

Brexit has been seen to impact upon the valuations of a number of UK-based property funds. As a result, the Investment Manager has closely reviewed those loans in the portfolio with property exposure, such as the bridge and development finance loans. The low LTVs and the type of property investment in these structures mean that the Investment Manager does not expect these loans to be impacted by Brexit-related factors, as demonstrated by the continued performance of these loans since the Brexit vote.

Company exposure

The Company's exposure to seven projects that have not yet completed construction with reference to total portfolio assets as at 31 December 2016 was 42%.

Elsewhere in the portfolio, the Company has exposure to the supply of commercial and industrial waste and the demand for high-end care beds (and the associated pricing of these income streams). The Investment Manager believes that conservative assumptions have been used for these factors as part of the financial model on which debt service of the Company's loans has been based, and contracting for these elements since financial close has been in line with or more favourable than the base case assumptions.

The bridging and development investments have exposure to UK residential property prices. However, the low LTV of these investments means that there is significant headroom in the underlying asset values to absorb movements in property valuations. Further, the tenor of any particular loan is short relative to the duration of the facility, offering further protection from any market changes over the medium and long term.

PRINCIPAL RISKS AND UNCERTAINTIES

Risk management

Role of the Board

The Board has the ultimate responsibility for risk management and internal control within the Company. The Board recognises the existence of inherent risks within the Company's operation and that effective risk management is critical to the success of the organisation. When setting the risk management strategy, the Board also determines the nature and extent of the principal risks they are willing to take to achieve the Company's strategic objectives.

The Board, with the assistance of the Audit Committee, undertakes a formal risk review twice a year to assess the effectiveness of the Company's risk management process and internal control systems. The review covers the operational, compliance and financial risks facing the Company. During the course of such review, the Board has not identified, nor been advised of any failings or weaknesses which it has determined to be of a material nature.

Role of the AIFM

The AIFM is required to operate an effective and suitable risk management framework to allow the identification, monitoring and management of the risks that the AIFM and the AIFs under its management are exposed.

The AIFM's permanent risk management function has a primary role alongside the Board in shaping the risk policy of the Company, in addition to responsibility for risk monitoring and risk measuring in order to ensure that the risk level complies on an ongoing basis with the Company's risk profile.

Principal risks faced by the Company include (but are not limited to) economic risk, financial risk, key resource risk, regulatory risk and execution risk.

The following items are the key components which the Company has in place to provide effective internal control:

 
Risk                         Impact                    How the risk              Link with strategy 
                                                        is managed 
---------------------------  ------------------------  ------------------------  ------------------------------------ 
Economic risk 
---------------------------  ------------------------  ------------------------  ------------------------------------ 
Property                      If the market             The Company's 
 The Company's                 value of any              property investments       *    Risk adjusted returns 
 investment portfolio          property investments      are at a low 
 includes loans                for which the             LTV level. In 
 to projects                   Company has               addition, the              *    Capital appreciation 
 involved in                   provided finance          credit risk 
 property, including           is found to               associated with 
 development                   be materially             each Project 
 property. Such                lower than assumed        Company is mitigated 
 investments                   or projected,             as the cash 
 are indirectly                this may adversely        flows receivable 
 exposed to the                impact the Company's      are secured 
 performance                   ability to recover        over the assets 
 of the underlying             the value of              of the Project 
 real estate                   its investments           Company, which 
 market in the                 in the event              in turn has 
 relevant area.                of a borrower             security over 
                               default or sale           the assets of 
                               process.                  the underlying 
                                                         projects. 
Valuation                     Material increases        The Company               *    Capital appreciation 
 The value of                  in interest               invests in investments 
 the investments               rates and reductions      with stable 
 made by the                   in real estate            pre-determined, 
 Company will                  prices may adversely      medium-term, 
 change from                   impact the value          asset or cash-flow 
 time to time                  of the Company's          backed revenues. 
 according to                  investment portfolio.     Where possible 
 a variety of                                            the Investment 
 factors, including                                      Manager ensures 
 movements in                                            that each loan 
 interest rates                                          carries an element 
 and inflation                                           of inflation 
 and general                                             protection. 
 market pricing 
 of similar investments. 
---------------------------  ------------------------  ------------------------  ------------------------------------ 
Financial risk 
---------------------------  ------------------------  ------------------------  ------------------------------------ 
Sufficiency 
 of due diligence 
 and assumptions 
 Subject to due               Errors in the             Where appropriate,         *    Regular growing distributions 
 diligence, the               due diligence             the Investment 
 Company makes                and these financial       Manager complements 
 investments                  models, or in             its analysis 
 which rely on                the methodology           through the 
 detailed financial           used in such              use of professional 
 models that                  financial models,         third-party 
 are based on                 or in the analysis        advisers, including 
 certain assumptions,         of the models             technical built 
 estimates and                or their assumptions,     asset consultants, 
 projections                  may mean that             financial and 
 of each investment's         the return on             legal advisers, 
 future cash                  an investment             expert market 
 flows (which                 in                        consultants, 
 primarily consist            a project is              independent 
 of                           less than expected.       valuers and 
 interest and                                           insurance experts. 
 principal receipts).                                   When modelling 
 The Investment                                         future cash 
 Manager's due                                          flows and structuring 
 diligence process                                      debt profiles, 
 may not reveal                                         the Investment 
 all facts that                                         Manager uses 
 may be relevant                                        assumptions 
 in connection                                          considered to 
 with an investment.                                    be conservative 
 There can be                                           by third-party 
 no assurance                                           experts. The 
 that the assumptions,                                  Investment Manager 
 estimates and                                          constantly monitors 
 projections                                            the actual performance 
 used turn out                                          of projects, 
 to be accurate                                         takes action 
 and hence that                                         where appropriate, 
 an investment's                                        and reports 
 actual cash                                            each quarter 
 flows will equal                                       on such performance 
 or exceed those                                        to the Board. 
 that are expected 
 or that the 
 targeted return 
 on such investment 
 will be achieved. 
---------------------------  ------------------------  ------------------------  ------------------------------------ 
Key resource 
 risk 
---------------------------  ------------------------  ------------------------  ------------------------------------ 
Reliance on 
 key personnel 
 at the Investment 
 Manager                      An inability              The Company                *    Risk adjusted returns 
 The Company                  by the Investment         has entered 
 is heavily reliant           Manager to retain         into a contractual 
 on the Investment            and recruit               engagement with 
 Manager to implement         the required              the Investment 
 the Company's                level of resources        Manager. The 
 strategy and                 with the required         performance 
 investment policy            skills and                of the Investment 
 to deliver its               experience may            Manager is 
 objectives through           adversely                 monitored by 
 the recruitment              impact its ability        the Board along 
 and retention                to service the            with the Company's 
 of key resources             needs of the              other key service 
 at the Investment            Company.                  providers on 
 Manager.                                               an ongoing basis. 
                                                        The Investment 
                                                        Manager provides 
                                                        regular updates 
                                                        to the Board 
                                                        on its resource 
                                                        and succession 
                                                        plans. 
---------------------------  ------------------------  ------------------------  ------------------------------------ 
Regulatory risk 
---------------------------  ------------------------  ------------------------  ------------------------------------ 
Change in laws, 
 regulation 
 and/or policy 
 The Company,                 Any change in             The Board monitors         *    Regular growing distributions 
 its operations               the laws, regulations     compliance information 
 and the underlying           and/or government         provided by 
 Project Companies            policy affecting          the Administrator,         *    Capital appreciation 
 are subject                  the Company               Company Secretary, 
 to changes in                or the underlying         Investment Manager 
 laws and                     Project Companies         and legal counsel 
 regulations                  may have a                and monitors 
 enacted by national          material adverse          ongoing compliance 
 and local governments.       effect on the             developments 
                              ability of the            in the Channel 
                              Company to successfully   Islands and 
                              pursue its investment     Europe along 
                              policy, to meet           with regulatory 
                              its investment            developments 
                              objective and             in the UK as 
                              therefore on              well as listing 
                              the value of              rules and FCA 
                              the Company.              marketing rules. 
                                                        The Company 
                                                        has a comprehensive 
                                                        compliance monitoring 
                                                        programme to 
                                                        ensure full 
                                                        compliance with 
                                                        legislation/regulation 
                                                        relevant to 
                                                        the Company's 
                                                        operations. 
---------------------------  ------------------------  ------------------------  ------------------------------------ 
Execution risk 
---------------------------  ------------------------  ------------------------  ------------------------------------ 
Availability 
 of suitable 
 investments 
 and reinvestment 
 risk                         If the Company            The Investment             *    Risk adjusted returns 
 There is no                  cannot invest             Manager is constantly 
 guarantee that               capital in suitable       in touch with 
 the Company                  assets in a               the market seeking 
 will be able                 timely manner,            new deals and 
 to make suitable             the uninvested            builds a specifically 
 investments                  cash balance              identified investment 
 with risk                    will have a               pipeline before 
 and return characteristics   negative impact           raising additional 
 that fit within              on the Company's          finance in an 
 the investment               returns.                  attempt to ensure 
 strategy                                               that capital 
 of the Company,                                        is deployed 
 or that suitable                                       in a timely 
 investments                                            fashion at the 
 that can be                                            Company's target 
 identified will                                        return level. 
 be made in a 
 timely manner. 
---------------------------  ------------------------  ------------------------  ------------------------------------ 
 

Going concern and viability statement

In accordance with the requirements of the UK Code, the Directors have assessed the financial prospects of the Company for the foreseeable future and made an assessment of the Company's ability to continue as a going concern. The Directors are satisfied that the Company has the resources to continue in business for the foreseeable future and furthermore are not aware of any material uncertainties that may cast significant doubt upon the Company's ability to continue as a going concern.

Twice a year, the Board carries out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency and liquidity. The Board also assesses the Company's policies and procedures for monitoring, managing and mitigating its exposure to these risks. The Directors have considered each of the Company's principal risks and uncertainties detailed on pages 25 and 26, in particular the risk of impact of changes in the external environment including macroeconomic, political, social, technological and regulatory changes that could materially affect the cash flows of the underlying investments. The Directors have also assessed the prospects of the Company over a longer period than the twelve months required by the going concern provision of the UK Code. The Board has determined that a five-year period to 31 December 2021 constitutes an appropriate period to provide its viability statement. Whilst the weighted average term of the loans within the investment portfolio is twelve years, the Company's experience is such that the financial forecasts to support the strategy will be subject to further capital raises for which the impact beyond a five-year term is difficult to assess. In addition, the extent to which macroeconomic, political, social, technological and regulatory changes beyond a five-year term may have a plausible impact on the Company are difficult to envisage. The assessment involved an evaluation of the potential impact on the Company of these risks occurring.

Where appropriate, the Company's financial model was subject to sensitivity analysis that involved flexing a number of key assumptions in the underlying financial forecasts for the current capital base in order to analyse the effect on the Company's net cash flows and other key financial ratios. This analysis included modelling the aggregated impact of significant reductions in interest income received, capital re-investment levels achieved and significant increases in the Company's operating expenses and debt financing costs that would be impacted by severe but plausible downside scenarios that incorporate the principal risks.

Based on this assessment of the principal risks facing the Company and the aggregated stress testing performed on the Company's prospects, the Directors confirm that they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five-year period of their assessment to 31 December 2021.

By order of the Board

Alex Ohlsson

Chairman

12 April 2017

BOARD OF DIRECTORS

Alex Ohlsson

Chairman - 47

Mr Ohlsson is the managing partner of the law firm Carey Olsen, and is recognised as an expert in corporate and finance law in Jersey with a particular focus on international real estate finance and structures. Mr Ohlsson joined Carey Olsen in 1991, became a Jersey solicitor in 1994 and an Advocate of the Royal Court of Jersey and a partner of Carey Olsen in 1995. He was educated at Queens' College, Cambridge, where he obtained an MA (Hons) in law. He is the independent chairman of the States of Jersey's audit committee and an advisory board member of Jersey Finance, Jersey's financial services promotional body. He acts as a non-executive director of a number of companies. He is also chairman of the LSE Main Market-listed company Foresight Solar Fund Limited. Mr Ohlsson was appointed to the Board on 14 September 2015.

Colin Huelin

Non-executive Director - 56

Mr Huelin graduated in mechanical engineering with a first class honours BSc degree and Diploma at Southampton University in June 1982. Mr Huelin completed his graduate management development and monitored professional development scheme with Shell UK and the Institute of Mechanical Engineers in 1986. Mr Huelin qualified as a Chartered Accountant with Ernst & Young in 1989 and was appointed Finance Director for Computer Patent Annuities (CPA) in February 1990. Mr Huelin was appointed CEO for CPA in 1995. In November 1998, he joined Abbey National Offshore as Head of Financial Planning, was promoted to Finance Director in 2003 and then Managing Director of Santander Private Banking in Jersey in November 2007, a position he held until 31 May 2015 when the business transferred to a Jersey branch of Santander UK plc under Article 48D of the Banking Business (Jersey) Law. Mr Huelin was appointed to the Board on 7 September 2015.

Joanna Dentskevich

Non-executive Director - 52

Mrs Dentskevich has over 25 years of risk, finance and investment banking experience gained in leading global banks worldwide, alternative investments and the offshore fiduciary industry. Mrs Dentskevich currently runs her own risk management advisory company providing advice and resourcing to offshore trust, fund and investment businesses. Previously, she was a Director at Morgan Stanley heading up its Global Customer Valuation Group, Director of Risk at Deutsche Bank and Chief Risk Officer of a London based hedge fund. Mrs Dentskevich has a BSc Hons in Maths & Accounting and is a Member of the Chartered Institute of Securities & Investments and a member of the Institute of Directors. She is also a non-executive director of the LSE (Specialist Fund Segment) traded company Blackstone/GSO Loan Financing Ltd. Mrs Dentskevich was appointed to the Board on 7 September 2015.

THE INVESTMENT MANAGER

David Conlon

Partner

Mr Conlon has overall responsibility for the provision of investment advice to the Company. Mr Conlon qualified as a chartered accountant with PwC before moving into project finance at KPMG where he focused on PFI transactions.

Mr Conlon has acted as a financial adviser to project finance transactions, as well as working for firms that have invested debt and equity into project finance opportunities. He has 14 years of experience in the sector. Over recent years, Mr Conlon has continued to focus on investments using project finance techniques in multiple sectors, including PFI and renewables. He is part of the origination and transaction team at the Investment Manager.

Philip Kent

Director

Mr Kent is responsible for asset sourcing and acquisition for the Company. Mr Kent joined GCP from Foresight Group where he was responsible for investments in the waste and renewable sectors, including large waste wood combustion projects and a pipeline of anaerobic digestion projects across the UK, since joining in 2012.

Mr Kent has been involved in the energy sector for ten years, working initially as a consultant within PA Consulting's Energy practice, focusing on energy markets and energy asset valuations. In 2008 he moved to Gazprom Marketing and Trading, working in risk management across a number of commodities before moving into the Clean Energy team. Mr Kent graduated with a degree in Geography from Oxford University.

Dion Di Miceli

Head of Investment Companies

Mr Di Miceli has responsibility for liaising with client boards, investors and advisers and leading product development alongside the fund managers. A member of the Chartered Institute for Securities & Investment since 2005, Mr Di Miceli qualified as a chartered accountant with Arthur Andersen LLP in 2002 and subsequently spent four years in the Investment Funds practice at Ernst & Young LLP. He joined the Investment Companies Team at Cenkos Securities plc in 2007 where, as a senior corporate adviser, he worked with investment company boards and their managers advising on and structuring a broad range of transactions covering IPOs, secondary issuance, mergers and corporate reconstructions. Mr Di Miceli joined the Investment Manager in February 2016.

Chloe Marlow

Head of Operations and Risk

Ms Marlow is responsible for reporting and monitoring of the ongoing performance of the Group. Before joining the Investment Manager in 2013, she worked in a broad range of financial services roles over ten years. Ms Marlow began her career at Lloyds Banking Group where she qualified as a chartered management accountant. After holding a number of roles at the bank, she went on to work for a large IFA before joining fund administrator Capita Sinclair Henderson Limited in 2011, where she was responsible for a portfolio of alternative real estate and infrastructure funds.

CORPORATE GOVERNANCE STATEMENT

Corporate Governance Code

The DTRs of the UKLA require certain listed companies to disclose how they have applied the principles and complied with the provisions of the UK Code to which the issuer is subject. The Board has considered the principles and recommendations of the UK Code issued by the FRC. A copy of the UK Code is available at www.frc.org.

Statement of compliance with the UK Code

The Board recognises the importance of a strong corporate governance culture that meets the requirements of the Listing Rules and DTRs of the UKLA. The Board has put in place a framework for corporate governance which it believes is appropriate for the Company. All Directors contribute to Board discussions and debates. The Board believes in providing as much transparency for shareholders as is reasonably possible. It should be noted that most of the Company's day-to-day responsibilities are delegated to third parties, the Company has no employees and the Directors are non-executive.

The Company has complied with the relevant provisions of the UK Code, except as set out below:

-- the role of the chief executive: the Board considers that the post of chief executive is not relevant for the Company, being an externally managed investment company;

-- the appointment of a senior independent Director: given the size and composition of the Board it is not felt necessary to separate the roles of Chairman and senior independent Director. The Board considers that the independent Directors have different qualities and areas of expertise on which they may lead where issues arise and to whom concerns can be conveyed;

-- executive Directors' remuneration: as the Board has no executive Directors, it is not required to comply with the principles of the UK Code in respect of executive Directors' remuneration and does not have a remuneration committee. A remuneration report is included on pages 40 and 41;

-- establishment of a nomination committee: the Board does not consider it necessary to establish a nomination committee since all of the Directors are non-executive and are considered independent as explained in more detail in the section of this report titled: Composition of the Board below. As the Board was appointed in September 2015, the Board does not yet have a policy on tenure. An explanation is detailed in the section of this report titled "Appointment and re-election of Directors" on page 32;

-- internal audit function: the Company delegates the majority of its operations to third parties and has no employees. The majority of these third parties have their own internal audit function and the Board has therefore determined that there is no need for the Company to have its own internal audit function but this is reviewed on an annual basis. The Directors consider semi-annually the principal risks relating to the operations of the Company. Such a review includes the consideration of whether the Company's third parties have adequate internal controls in place; and

-- the Chairman of the Company, Mr Alex Ohlsson is also a member of the Audit Committee: the Board believes it is appropriate for Mr Ohlsson to be a member of the committee as he is considered to be independent.

The Board considers that these provisions are not relevant to the position of the Company, being an externally managed investment company. The Company has therefore not reported further in respect of these provisions.

The Board's responsibilities and processes

The Board is responsible to shareholders for the overall management of the Company, and may exercise all the powers of the Company subject to the relevant laws, the Company's Articles and any directions given by special resolution of the shareholders. The Company's Articles empower the Board to offer, allot, grant options over or otherwise deal with or dispose of the Company's shares. Companies Law authorises the Company to make market purchases of its own shares if such purchase has first been authorised by a resolution of the Company.

At the AGM on 12 October 2016, the shareholders renewed the Board's authority to allot ordinary shares and to repurchase ordinary shares on behalf of the Company subject to certain limits. Details of the authorities which the Board will be seeking at the 2017 AGM are set out in the 2017 notice of AGM.

At each quarterly meeting of the Board, the Directors follow a formal agenda which includes a review of the Company's investments and associated matters such as gearing, asset allocation, principal risks, marketing and investor relations and economic and sector issues.

The Board is also active in ensuring any regulatory developments which may affect the operations of the Company are considered. The Board regularly considers the Company's investment policy, objective and strategy. In order to enable the Directors to discharge their responsibilities effectively, they have full and timely access to all relevant information.

Matters reserved for the Board

The Board has approved a formal schedule of matters reserved which is available upon request from the Company Secretary.

Composition of the Board

As at 31 December 2016, the Board comprised three Directors, all of whom are non-executive and are considered to be independent.

   --     Alex Ohlsson is the Chairman of the Board; 
   --     Colin Huelin is the Chairman of the Audit Committee; and 
   --     Joanna Dentskevich is the Chair of the Management Engagement Committee. 

Each Director has signed a letter of appointment which sets out the terms and conditions of their appointment. These letters are available for inspection at the Company's registered office. No Director has any contract or arrangement in place between themselves and the Company. Further details as to the terms of appointment of the Directors are set out in the remuneration report on page 40.

Overview of Board

Appointments to the Board continue to be based on merit, regardless of gender, ethnic group or background. The Board comprises two male Directors and one female Director. The Company has no other employees.

Diversity

The Board recognises the recommendations made by the UKLA regarding Board diversity and acknowledges that gender diversity is a key element to broaden the contribution made to Board deliberations and aid the Board's effectiveness. However, as the Board is small, comprising only three members, the Board continues to believe that diversity quotas are not appropriate. The Board also accepts that there are many different aspects to diversity, including professional and industry specific knowledge and experience, understanding of geographical markets, different cultures as well as gender, all of which are/will be considered when making appointments to the Board. Board appointments will be made based on merit and calibre.

Appointment and re-election of Directors

The appointment and re-election of Directors is detailed in the remuneration report on page 40.

As the Board was appointed in September 2015, the Board does not yet have a policy regarding tenure of service however the Board recognises that any decisions regarding tenure should balance the need to maintain continuity, knowledge, experience and independence, against the need to periodically review the Board composition in order to have the appropriate mix of skills, experience, age and length of service.

Each Director was subject to election at the first AGM held on 12 October 2016 and one-third of the Directors (excluding any Director who has been appointed by the Board since the previous AGM) shall be subject to re-election annually. Mr Alex Ohlsson will stand for re-election by shareholders at the forthcoming AGM of the Company.

Directors' independence

The Board has reviewed the independence of each Director in accordance with the guidance set out under principle B.1 and Code B.1.1 of the UK Code. The Board acknowledges that all Board members have holdings of ordinary shares in the Company as at 31 December 2016. Further details are provided in the statement of Directors' shareholding and share interests within the remuneration report on page 41.

The Board has discussed the interests in the Company held by all three Board members and it is satisfied that it does not materially impact their ability to exercise independent judgement on the Company. Accordingly, the Board considers all Directors on the Board to be independent.

Performance evaluation

During the period, the Directors carried out an internal evaluation process of the Board's and committees' performance. The evaluation process included the completion of two separate questionnaires by the Directors. The areas under review included an assessment of the Chairman, Board and committee processes and effectiveness, overall strategy, corporate governance, investment management, communications with shareholders, training requirements and personal development. A report summarising the conclusions is due to be presented to and discussed by the Board at a meeting scheduled on 25 April 2017. The Company intends to carry out an evaluation of its Audit Committee in June 2017.

The Company intends to carry out an external performance review every three years and the first external review is due to take place in 2019.

Additionally, the Board undertakes annual anti-money laundering training and undertakes the required hours of continuing professional development in accordance with their professions and Jersey regulations including training on areas relating to the Company's activities.

The Board attempts to ensure that it has the appropriate balance of skills, experience, knowledge and independence in order to remain effective. Biographical details of the Directors are shown on page 28.

Board operation

The Board holds formal meetings on a quarterly basis and additional ad-hoc meetings are held when necessary. Attendance at the quarterly Board and committee meetings is detailed in the table on page 33 under the heading "Meetings".

Committees

The structure includes an Audit Committee and a Management Engagement Committee.

Audit Committee

The membership and activities of the Audit Committee are described in its report on pages 36 to 39.

Management Engagement Committee

Due to the size of the Board, the Management Engagement Committee comprises all Directors of the Company. The committee meets at least once a year to consider the performance of the Investment Manager and other third party service providers; the terms of their engagement and continued appointment. The committee met once during the period to independently evaluate the Investment Manager and third party service providers and no material issues were raised.

The terms of reference for each of the committees are available upon request from the Company Secretary.

Meetings

The number of meetings of the Board and committees held during the period and the attendance of individual Directors are shown below:

 
                                             Number of meetings 
                                          attended during the period 
                                  ----------------------------------------- 
                       Number of                                     Joanna 
Meetings           meetings held   Alex Ohlsson  Colin Huelin   Dentskevich 
----------------  --------------  -------------  ------------  ------------ 
Quarterly 
 Board                         4              4             4             4 
Audit Committee                4              3             4             4 
Management 
 Engagement 
 Committee                     1              1             1             1 
----------------  --------------  -------------  ------------  ------------ 
Total number 
 of meetings 
 attended                      9              8             9             9 
----------------  --------------  -------------  ------------  ------------ 
 

During the period, 23 additional ad-hoc Board meetings were held. These meetings were in respect of capital raising, the issue of a prospectus, C share conversion, allotment of shares, conflicted investments, a revolving credit facility and regulatory/procedural matters such as the adoption of revised procedures following the implementation of MAR.

Conflicts of interest

The Directors have declared any conflicts or potential conflicts of interest to the Board which has the authority to approve such situations. The Company Secretary maintains the register of Directors' conflicts of interests which is reviewed quarterly by the Board and whenever changes are notified. The Directors advise the Company Secretary and Board as soon as they become aware of any conflicts of interest. Directors who have conflicts of interest do not take part in discussions which relate to any of their conflicts.

It is the responsibility of each individual Director to avoid a conflict arising. In the event that a conflict of interest does arise, the Director(s) must request authorisation from the Board as soon as they become aware of the possibility of a situational conflict arising.

The Board is responsible for considering Directors' requests for authorisation of situational conflicts and for deciding whether or not the situational conflict should be authorised. The factors to be considered will include whether the situational conflict could prevent the Director from properly performing his duties, whether it has, or could have, any impact on the Company and whether it could be regarded as likely to affect the judgement and/or actions of the Director in question. When the Board is deciding whether to authorise a conflict or potential conflict, only Directors who have no interest in the matter being considered are able to take the relevant decision, and in taking the decision the Directors must act in a way they consider, in good faith, will be most likely to promote the Company's success. The Directors are able to impose limits or conditions when giving authorisation if they believe this is appropriate in the circumstances.

The Directors must also comply with the statutory rules requiring company Directors to declare any interest in an actual or proposed transaction or arrangement with the Company.

Dialogue with shareholders

The Board recognises the importance of maintaining a purposeful relationship with shareholders. The Company, through its Directors, Investment Manager, Financial Adviser and Broker, engages in ongoing communication with its shareholders. The Board encourages shareholders to attend and vote at general meetings of the Company in order that they may discuss governance and strategy and to understand shareholders' issues and concerns. The Chairman of the Board and the Chair of each of the committees attend general meetings of the Company to answer any questions posed by the shareholders.

The Company's annual and interim reports are dispatched to shareholders by post and are also available to download from the Company's website at https://www.gcpuk.com/gcp-asset-backed-income-fund-ltd/investor-relations/publications/all. This information is supplemented by the quarterly calculation and publication of the NAV of the Company's shares on the LSE and the publication of a quarterly factsheet by the Investment Manager.

In the annual report and financial statements, the Directors seek to provide shareholders with information in sufficient detail to allow them to obtain a reasonable understanding of recent developments affecting the business and the prospects for the Company in the year ahead. The various sections of the strategic report on pages 10 to 27 provide further information.

Communication of up-to-date information is provided through the Company's website at https://www.gcpuk.com/gcp-asset-backed-income-fund-ltd/investor-relations/announcements.

Internal controls and risk management review

The Directors acknowledge that they have overall responsibility for ensuring that there are in place systems of internal control, both financial and non-financial, and for reviewing their effectiveness. The purpose of the internal financial controls is to ensure that proper accounting records are maintained, the Company's assets are safeguarded and the financial information used within the business and information for publication is accurate and reliable; such a system can provide only reasonable and not absolute assurance against material misstatement or loss.

The Board reviews the effectiveness of its risk management systems and all financial performance and results notifications together with the Investment Manager. Non-financial internal controls include the systems of operational and compliance controls maintained by the Administrator and the Investment Manager in relation to the Company's business as well as the management of key risks as referred to in the strategic report. Please refer to pages 24 to 26 for a more detailed overview of the principal risks that have been assessed. There were no matters arising from this review that required further investigation and no significant failings or weaknesses were identified.

Responsibility for accounting and company secretarial services has been contractually delegated to the Administrator. The Administrator has established its own system of internal controls in relation to these matters, details of which have been reviewed by the Board as part of the semi-annual risk assessment.

Internal control assessment process

The Board conducts a risk assessment on a semi-annual basis. The review covers the operational, compliance and financial risks facing the Company. The Directors confirm that by means of the procedures, and in accordance with the UK Code, they have established a continuing process for identifying, evaluating and managing the significant potential risks faced by the Company and have reviewed the effectiveness of the internal control systems. The Board has identified risk management controls in the following key areas:

   --     economic risk (property and valuation); 
   --     financial risk (sufficiency of due diligence and assumptions); 
   --     key resource risk (reliance on key personnel at the Investment Manager); 
   --     regulatory risk (change in laws, regulation and/or policy); and 
   --     execution risk (availability of suitable investments and reinvestment risk.) 

In arriving at its judgement of what risks the Company faces, the Board has considered the Company's operations in the light of the following factors:

-- the nature and extent of risks which it regards as acceptable for the Company to bear within its overall business objective;

   --     the threat of such risks becoming reality; 
   --     the Company's ability to reduce the incidence and impact of risk on its performance; 

-- the cost to the Company and benefits related to the review of risk associated controls of the Company; and

   --     the extent to which the third parties operate the relevant controls. 

This process has been in place throughout and subsequent to the period under review.

Market Abuse Regulation

Following the implementation of MAR on 3 July 2016, the Board formally adopted revised procedures in relation to the management, identification and disclosure of inside information and share dealing in accordance with MAR.

AIFMD

The Company is classed as an externally-managed AIF under the Directive. The Board appointed the Investment Manager as the authorised AIFM to the Company and Capita Trust Company (Jersey) Limited as the Company's Depositary under the Directive.

AIFM remuneration

The Company's Investment Manager is authorised as an AIFM by the FCA under the AIFMD regulations. The Company has provided disclosures on its website, http://www.gcpuk.com/gcp-asset-backed-income-fund-ltd/investor-relations/publications/all incorporating the requirements of the AIFMD regulations.

The total annual fee paid to the Investment Manager by the Company is disclosed in note 18 to the financial statements.

Annual General Meeting

The AGM of the Company will be held on 23 May 2017 at 12 Castle Street, St Helier, Jersey JE2 3RT.

By order of the Board

Alex Ohlsson

Chairman

12 April 2017

AUDIT COMMITTEE REPORT

Summary

This is the Company's first annual external audit by PwC. Revised versions of the UK Code were published in April 2016 with the amended provisions having a specific impact on Audit Committee reporting. The Board has adopted the provisions set out in the revised UK Code.

The Audit Committee operates within clearly defined terms of reference, a copy of which is available on request from the Company Secretary. The terms of reference require the Audit Committee to monitor the Company's financial reporting, internal financial controls and risk management and external audit process. In December 2016, following discussions with the Board, the Audit Committee reviewed and agreed updates to its terms of reference in line with the revisions to the UK Code.

The Audit Committee is responsible for making recommendations to the Board in respect of appointment, re-appointment, and remuneration of the Auditor and the Auditor's plan for the period.

Composition

At 31 December 2016, the Audit Committee comprised the Audit Committee Chairman, Colin Huelin, Alex Ohlsson and Joanna Dentskevich. All members of the Audit Committee are independent Directors; have no links with PwC; and are independent of the Investment Manager.

The Board considers that the independence and diverse backgrounds of the members, taken with their combined skills and experience enables the Audit Committee to discharge its responsibilities fully.

The Audit Committee meets at least twice a year. Details of meetings held in the period under review are set out on page 33.

Although not members of the Audit Committee, the Company Secretary, the lead partner and representatives from the Company's Auditors are invited to attend committee meetings at which the Auditor may have the opportunity to meet with the Audit Committee without representatives of the Investment Manager being present. The Audit Committee Chairman meets when appropriate with the external Auditor ahead of the meetings to review key audit areas for discussion with the Audit Committee. The Auditor is not present when their performance and/or remuneration is discussed. As set out on page 31, the Board has determined that there is no need for the Company to have an internal audit function, but this is reviewed on an annual basis.

The Board has agreed that the Audit Committee chairman has recent and relevant financial experience as required by the provisions of the UK Code, refer to the Directors' biographies on page 28.

After each meeting, the Audit Committee Chairman reports to the Board on the main issues discussed.

The Audit Committee has complied with relevant audit committee requirements under the UK Code.

Financial reporting

The Audit Committee considered the requirements of the UK Companies Act 2006 (Strategic Report and Directors' Report) Regulation 2013 with which it is complying voluntarily, in line with best practice reporting. The Audit Committee specifically reviewed the Company's first annual report and financial statements to conclude whether the financial reporting is fair, balanced, understandable, comprehensive and consistent with how the Board assesses the performance of the Company's business during the financial period, as required for companies with a Premium Listing under the UK Code.

As part of this review, the Audit Committee considered if the annual report and financial statements provided the information necessary to shareholders to assess the Company's performance, strategy and business model and reviewed the description of the Company's key performance indicators.

The Audit Committee presented its conclusions to the Board and the Board concluded that it considered the annual report and financial statements, taken as a whole, to be fair, balanced and understandable and provides the information necessary for the shareholders to assess the Company's performance, business model and strategy.

In addition to the above matters, the Audit Committee's work was focused on the following areas:

-- reviewing the effectiveness of the internal financial control environment of the Company and the Company's compliance with its regulatory requirements which is further explained on page 34 of the corporate governance statement;

-- reviewing and recommending to the Board significant accounting matters and accounting disclosures in the half yearly and annual financial statements of the Company including matters of judgement in relation to valuation;

-- overseeing the Company's relations with its Auditor including assessing the conduct and effectiveness of the audit process and the Auditor's independence and objectivity, recommending the Auditor's reappointment and approving the Auditor's fees; and

   --     reviewing the Company's compliance with its regulatory obligations in Jersey. 

The Audit Committee has direct access to the Auditor and to the key senior staff of the Investment Manager and reports its findings and recommendations to the Board which retains the ultimate responsibility for the financial statements of the Company. All recommendations were accepted by the Board.

In September and December 2016, the Audit Committee met with the Auditor and reviewed and agreed the Auditor's audit plan.

Significant issues considered

After discussions with the Investment Manager and the Auditor, the Audit Committee identified two significant risks. The first related to management override of controls within the Company. The second related to risk of material misstatement of the Company's financial statements attributed to the valuation of investments.

Valuation of investments

As outlined in note 12, the total carrying value of financial assets at fair value at 31 December 2016, was GBP158.4 million. Market quotations are not available for these financial assets such that their valuation is undertaken using a discounted cash flow methodology. This requires a series of material judgements to be made as further explained in note 17.

The Board discussed the valuation process with the Valuation Agent in April 2016 and the Audit Committee Chairman discussed the valuation process in respect of a specific investment in December 2016. The Board and the Audit Committee concluded that the methodology adopted was appropriate and in accordance with the terms of engagement.

The Valuation Agent performs a quarterly financial asset valuation and provides a detailed valuation report to the Company which is discussed with the Investment Manager at each quarterly Board meeting. Further discussions were undertaken with the Investment Manager throughout the period as part of the review of the interim financial report and financial statements.

In order to provide further assurance regarding the basis of valuation, the Company intends to meet with the Valuation Agent at least once a year to discuss this as well as reviewing the formal reports from the Valuation Agent on a regular basis.

The discount rates adopted to determine the valuation are selected and recommended by the Valuation Agent. The discount rate is applied to the expected future cash flows for each investment's financial forecasts, to arrive at a valuation (discounted cash flow valuation). The resulting valuation is sensitive to the discount rate selected. The Valuation Agent is experienced and active in the area of valuing these investments and adopts discount rates reflecting their current and extensive experience of the market. The discount rate assumptions and the sensitivity of the valuation of the investments to this discount rate are disclosed in note 17.3.

The Audit Committee discussed the material estimates and judgements and also compared this to feedback from the Investment Manager. After discussion with the Auditor, the Audit Committee was satisfied that the range of discount rates were appropriate for the valuation carried out by the Valuation Agent.

The Auditor explained the results of their audit and that on the basis of their audit work there were no adjustments proposed that were material in the context of the financial statements as a whole.

Accounting policies, critical accounting estimates and key judgements

The Audit Committee reviewed the accounting policies, including a paper on disclosures from the Administrator and note 2.2 and 2.3 to the annual financial statements that relate to critical accounting estimates and key judgements, and reconfirmed that they remain appropriate for the Company.

Going concern and viability statement

The Audit Committee considered the Investment Manager's forecasts of cash flows and net debt as well as the financing facilities available to the Company. Following this review and a discussion of the sensitivities, the Audit Committee confirmed that it continues to be appropriate to follow the going concern basis of accounting in the annual report and financial statements. Further detail on the basis of the going concern assessment and viability by the Directors is set out on page 27 of the strategic report.

External audit

Audit fees for the period amounted to GBP100,000 and fees for non-audit related services amounted to GBP70,000. Mr Karl Hairon is the partner from PwC responsible for the audit.

To fulfil its responsibility regarding the independence of the Auditor, the Audit Committee considered:

   --     a report from the Auditor describing its arrangements for maintaining independence; and 
   --     the extent and nature of the non-audit services provided by the Auditor. 

During the period from IPO on 23 October 2015 to 31 December 2016, PwC provided non-audit related services in relation to reporting accountant services on IPO and the issuance and conversion of C shares. At the Audit Committee meeting in December 2016, PwC confirmed this had not impacted their independence and outlined the reasons for this. The Audit Committee considered this and is satisfied that these non-audit related services had no bearing on the independence of the Auditor.

The following table summarises the remuneration paid to PwC for audit and non-audit related services during the period ended 31 December 2016:

 
                                 For the period 
                                           from 
                                     23 October 
                                           2015 
                                       (date of 
                                        IPO) to 
                                    31 December 
PricewaterhouseCoopers CI                  2016 
 LLP                                    GBP'000 
-------------------------------  -------------- 
Annual audit of the Company                  55 
Reporting accountant services 
 - LSE Main Market listing                   45 
Reporting accountant services 
 - issuance of C shares                      20 
Audit of financial information 
 for prospectus - issuance 
 of C shares                                 45 
C share conversion                            5 
-------------------------------  -------------- 
Total                                       170 
-------------------------------  -------------- 
 

The Audit Committee reviewed the effectiveness of the Audit process during the period considering performance, objectivity, independence, relevant experience and materiality with PwC throughout the period. To assess the effectiveness of the Auditor, the Audit Committee reviewed:

   --     the Auditor's fulfilment of the agreed audit plan and variations from it; 

-- the Auditor's report to the Audit Committee highlighting any issues that arose during the course of the audit; and

-- feedback from the Investment Manager and Administrator evaluating the performance of the audit team.

Where non-audit related services are to be provided to the Company by the Auditor, full consideration of the financial and other implications on independence of the Auditor arising from any such engagement will be considered before proceeding. All non-audit related services are pre-approved by the Audit Committee if it is satisfied that relevant safeguards are in place to protect the Auditors' independence and objectivity.

Following this review, the Audit Committee has recommended the re-appointment of PwC as the Company's Auditor at the forthcoming AGM.

Colin Huelin ACA

Chairman of the Audit Committee

12 April 2017

REMUNERATION REPORT

The Company does not have a remuneration committee as the Board agreed that the size and nature of the Board does not warrant establishing a separate committee.

The Company's report on remuneration will be subject to an advisory shareholder vote at the 2017 AGM. Although it is not a requirement under the Companies Law to have the report on remuneration approved by shareholders, the Board believes that as a company whose shares are listed on the Main Market of the LSE, it is good practice to do so. Accordingly a resolution to approve the report on remuneration will be proposed at the forthcoming AGM. This report is not subject to audit.

The Chairman is entitled to annual remuneration of GBP29,500. The other Directors are entitled to annual remuneration of GBP24,000, with Colin Huelin receiving an additional annual fee of GBP3,500 for acting as Chairman of the Audit Committee. The aggregate of such fees shall not exceed GBP300,000 per annum (or such larger sum that the Company may, by ordinary resolution, determine).

The fees paid to the Directors in the period 7 September 2015 to 31 December 2016 are set out in the table below:

 
                                          Audit     Total fees 
                         Directors'   Committee           paid 
                               fees        fees   to Directors 
                            GBP'000     GBP'000        GBP'000 
-----------------------  ----------  ----------  ------------- 
Mr Alex Ohlsson                  38           -             38 
Mr Colin Huelin                  32           4             36 
Mrs Joanna Dentskevich           32           -             32 
-----------------------  ----------  ----------  ------------- 
Total                                                      106 
-----------------------  ----------  ----------  ------------- 
 

Directors' expenses for the period totalled GBP2,000.

Relative importance of the spend on pay

The table below sets out Directors fees for the Company in respect of the period ended 31 December 2016 as a relative proportion of the Company's total expenses for the period:

 
                         31 December 
                                2016 
-----------------------  ----------- 
Percentage of expenses          4.7% 
-----------------------  ----------- 
 

Directors' and Officers' liability insurance cover is maintained by the Company on behalf of the Directors. No other remuneration or compensation was paid or was payable by the Company during the period to any of the Directors, nor does any Director have any entitlement to bonuses, pensions, share options or any long-term incentive plans or any other benefits in respect of their services as non-executive Directors of the Company.

The Directors were appointed as non-executive Directors under letters of appointment issued on 28 September 2015. The Directors' appointments can be terminated in accordance with the Company's Articles and without compensation. A copy of the Articles is available upon request from the Company Secretary.

Statement of Directors' shareholding and share interests

At the period end, Alex Ohlsson had a holding of 50,000 ordinary shares in the Company. Colin Huelin had a holding of 19,900 ordinary shares in the Company and Joanna Dentskevich had a holding of 39,800 ordinary shares in the Company.(1)

Accordingly, the Board is satisfied that the interests in the Company held by Directors does not materially impact their ability to exercise independent judgement on the Company and considers all Directors on the Board to be independent.

Statement of voting at general meeting

The Company is committed to ongoing shareholder dialogue and takes an active interest in voting outcomes. Where there are substantial votes against any resolution at the AGM, the Company will liaise with investors and agree on the actions it intends to take going forward.

Approval

This remuneration report was approved by the Board on 12 April 2017 and signed on its behalf by:

By order of the Board

Alex Ohlsson

Chairman

12 April 2017

(1) The Directors' shareholdings are either direct and/or indirect holdings of ordinary shares in the Company.

DIRECTORS' REPORT

The Directors are pleased to present their annual report and financial statements for the period 7 September 2015 to 31 December 2016. The corporate governance statement set out on pages 30 to 35 forms part of this report.

Principal activity and business review

The strategic report has been prepared by the Directors and should be read in conjunction with the Chairman's statement and forms part of the annual report to shareholders.

Greenhouse gas emissions reporting

The Company has no employees or property, and it does not purchase electricity, heat, steam or cooling for its own use. The Company outsources all services on a fee basis, and, as such it is not practical to attempt to measure or quantify emissions in respect of any outsourced energy use.

General information

The Company is a registered public company incorporated and domiciled in Jersey on 7 September 2015, with registration number 119412. The Company is governed by the Companies Law and the CIF Law.

The Company is a closed-ended investment company. The ordinary shares of the Company, and the C shares when in issue, are listed on the LSE's Main Market.

On 12 October 2016, the Company changed its name from Project Finance Investments Limited to GCP Asset Backed Income Fund Limited, following shareholder approval at the 2016 AGM.

Dividends

Details of the dividends paid and declared during the period are set out on page 18 and in note 10.

Share capital

During the period, the Company issued i) 2 ordinary shares on incorporation, ii) 106,000,000 ordinary shares at IPO, iii) 44,086,270 C shares in April 2016, (which were converted to 43,647,347 ordinary shares in October 2016); and iv) 14,964,734 ordinary shares in November 2016. Details of the movements in share capital during the period are set out in the statement of changes in equity on page 54 and in note 16.

At 31 December 2016, the Company's issued share capital comprised 164,612,083 ordinary shares of no par value, none of which were held in treasury.

At general meetings of the Company, every holder shall have one vote in respect of every ordinary share. When C shares are in issue, every C shareholder shall have one vote in respect of every C share.

Significant voting rights

As at 31 December 2016, the Company had received notification of the following disclosable interests in the voting rights of the Company:

 
                                          % of total 
Name                     Shares held   voting rights 
-----------------------  -----------  -------------- 
City of Bradford 
 Metropolitan DC          11,940,088            7.25 
CCLA Investment 
 Management               11,011,478            6.69 
Bank of Montreal          11,000,000            6.68 
Brewin Dolphin            10,812,979            6.57 
Premier Fund Managers 
 Limited                   9,893,334            6.01 
Close Brother Asset 
 Management                9,053,139             5.5 
EFG Harris Allday          8,656,921            5.26 
Smith & Williamson 
 Investment Management     6,619,852            4.02 
-----------------------  -----------  -------------- 
 

The following changes have been notified to the Company between 31 December 2016 and the date of this report:

 
                                                 % of total 
Name                            Shares held   voting rights 
------------------------------  -----------  -------------- 
Bank of Montreal                 12,000,000            4.92 
Premier Fund Managers Limited     9,464,084            3.88 
------------------------------  -----------  -------------- 
 

The table of significant shareholders disclosed above forms part of note 2.3(c) in the financial statements.

Directors' interests

At the period end, none of the Directors or any persons connected with them have had a material interest in the Company's transactions or agreements during the period.

Details of the ordinary shares held by the Directors as at 31 December 2016 are set out within the remuneration report on page 41.

None of the Directors or the Chairman sit on the Boards of any other Companies managed by the Investment Manager and do not have any close family ties with any of the Company's advisers.

There are no agreements between the Company and its Directors concerning compensation for loss of office.

There has been no change to the interests of each Director between 31 December 2016 and the date of this report.

Directors' and officers' liability insurance and indemnity agreements

The Company has purchased insurance to cover Directors' and officers' liability, as permitted by the Companies Law.

Key service providers

Investment Manager

Gravis Capital Partners LLP is the Investment Manager and AIFM to the Company. The Investment Manager was incorporated in England and Wales on 14 October 2007 under the Limited Liability Partnership Act 2000 (registered number OC332060) and is authorised and regulated by the FCA (registration number 487393). The partners of the Investment Manager formed Gravis Capital Partners LLP in May 2008 as a specialist advisory boutique offering fund management services, providing investors access to income generating defensive sectors in the UK.

The Investment Manager provides advice to the Directors to enable them to make informed decisions for the Company's funding requirements (including advice and assistance in any equity/further fund raising process) and also borrowing/gearing requirements. The Investment Manager also provides discretionary portfolio management services to the Company, subject to the overall control and supervision of the Directors.

The Investment Manager recommends and regularly reviews the Company's investment policy and performs and/or procures all due diligence in relation to potential investments for the Company.

In addition, the Investment Manager is responsible, inter alia, for the following:

   --     maintaining a website showing the NAV of the shares; 

-- presenting to meetings of the Board in relation to: (i) performance of existing investments; and (ii) opportunities in relation to new investments;

   --     monitoring the credit market generally; 

-- providing the Company's Valuation Agent or its delegates with such information as any of them may from time to time require to provide an independent fair value of the investment portfolio; and

-- conducting investor relationship management activities, including making presentations to existing and potential investors and intermediaries.

The role of the AIFM is explained in the principal risk and uncertainties report on page 24.

The senior management members of the Investment Manager have extensive experience of originating, structuring and managing project finance transactions across the energy, infrastructure, property and asset finance sectors. This experience has informed the Investment Manager's investment approach since its inception, offering market access to its asset backed finance approach and expertise applied to the UK public infrastructure sector.

The Company is party to an investment management agreement with the Investment Manager, dated 28 September 2015 pursuant to which the Company has appointed the Investment Manager to provide discretionary portfolio and risk management services relating to the assets on a day-to-day basis in accordance with its investment objectives and policies, subject to the overall control and supervision of the Board.

The fee for the provision of these services during the period was GBP1,154,328 in respect of investment management and advisory fees. Additional arrangement fees amounting to GBP185,000 were paid to the Investment Manager in relation to the issuance of the C shares. The investment management agreement continues until terminated by either party giving twelve months' written notice. Such notice must not be given prior to the fifth anniversary of admission. The Investment Manager has also been appointed as AIFM for an annual fee of GBP22,500. During the period, the fee for the provision of these services was GBP28,000. Further information is set out in note 18.

The Investment Manager is also the Investment Adviser to GCP Infrastructure. The Investment Manager has agreed with GCP Infrastructure that where it identifies an investment which, in its opinion acting reasonably and in good faith, falls within the remit of GCP Infrastructure's investment policy, GCP Infrastructure will have a right of first refusal.

The Board has been notified of the Investment Manager's intention, subject to regulatory approval, to transfer its fund management and advisory business from the existing limited liability partnership to a newly incorporated management company under substantially the same ownership as the current limited liability partnership. Accordingly, it is currently anticipated that the investment management agreement will be novated to the new management company in Q2 2017. Under the novation agreement, the new management company will assume liability for all acts and omissions of the existing limited liability partnership vehicle under the investment management agreement.

Administrator and Company Secretary

Fund accounting, administration services and company secretarial services are provided to the Company by Capita Financial Administrators (Jersey) Limited pursuant to an agreement dated 29 September 2015. The fee for the provision of these services during the period was GBP220,000. The agreement with Capita Financial Administrators (Jersey) Limited continues until terminated by either party on giving not less than six months' written notice.

Depositary

Depositary services are provided to the Company by Capita Trust Company (Jersey) Limited pursuant to an agreement dated 29 September 2015. The fee for the provision of these services during the period was GBP50,000. The agreement with Capita Trust Company (Jersey) Limited continues until terminated by either party on giving not less than six months' written notice.

Registrar

Registrar services are provided to the Company by Capita Registrars (Jersey) Limited pursuant to an agreement dated 29 September 2015. The fee for the provision of these services during the period was GBP38,000. The agreement with Capita Registrars (Jersey) Limited continues until terminated by either party on giving not less than six months' written notice.

The Management Engagement Committee undertakes an annual review of the effectiveness of all third-party service providers. Following the first review in September 2016, it is the Management Engagement Committee's opinion that the continuing appointment of the Investment Manager, the Administrator, the Company Secretary, the Depositary and the Registrar, on the terms agreed, is in the best interests of the Company and its shareholders.

Political donations

The Company made no donations to political parties or organisations during the period and no political expenditure was incurred.

Annual general meetings

The Company's annual report and financial statements for the period will be tabled for approval at the Company's 2017 AGM. The AGM will be held on 23 May 2017 at 12 Castle Street, St Helier, Jersey JE2 3RT.

Share repurchases

No shares have been bought back in the period. The latest authority to purchase ordinary shares for cancellation was granted to the Directors on 12 October 2016 and expires on the date of the next AGM. The Directors are proposing that their authority to buy back shares be renewed at the forthcoming AGM on 23 May 2017.

Treasury shares

The Company may hold any ordinary shares that it purchases as treasury shares or cancel them, in accordance with the Articles and the Companies Law. The Directors believe that it is desirable for the Company to have this choice. Holding the shares purchased as treasury shares will give the Company the ability to re-sell or transfer them quickly and cost-effectively and will provide the Company with additional flexibility in the management of its capital base. The decision whether to cancel any shares purchased by the Company or hold such shares as treasury shares will be made by the Directors at the time of purchase, on the basis of the Company's and shareholders' best interests.

The Company does not hold any shares in treasury at the period end.

Disclosure of information to the Auditor

Each of the persons who is a Director at the date of approval of this annual report confirms that:

-- so far as they are aware, there is no relevant audit information of which the Company's Auditor is unaware; and

-- they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.

External audit

Resolutions to appoint PwC as Auditor to the Company and for the Directors to determine the Auditors' remuneration will be proposed at the forthcoming AGM on 23 May 2017.

Financial risk management

Information about the Company's financial risk management objectives is set out in note 17 to the financial statements.

Non-mainstream pooled investments

The Board notes the rules of the UK FCA on the promotion of non-mainstream pooled investments, effective from 1 January 2014. The Board confirms that it conducts the Company's affairs, and intends to continue to conduct its affairs, so that the Company's shares will be "excluded securities" under the FCA's new rules. This is on the basis that the Company, which is resident outside the EEA, would qualify for the approval as an investment trust by the Commissioners for HM Revenue and Customs under Sections 1158 and 1159 of the Corporation Tax Act 2010 if resident and listed in the UK. Therefore, the Company's shares will not amount to non-mainstream pooled investments. Accordingly, promotion of the Company's shares will not be subject to the FCA's restriction on the promotion of non-mainstream pooled investments.

Requirements of the Listing Rules

Listing Rule 9.8.4 requires the Company to include specified information in a single identifiable section of the annual report or a cross reference table indication where the information is set out. The Directors confirm that there are no disclosures required in relation to Listing Rule 9.8.4.

By order of the Board

Alex Ohlsson

Chairman

12 April 2017

STATEMENT OF DIRECTORS' RESPONSIBILITIES

Under the terms of the DTRs of the UKLA, the Directors are responsible for preparing the annual report and financial statements in accordance with applicable law and IFRS.

Companies Law requires the Directors to prepare financial statements for each year, which give a true and fair view of the state of affairs of the Company and the profit and loss for that year.

The Directors are required to:

   --      properly select suitable accounting policies and apply them consistently; 

-- present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

-- provide additional disclosures when compliance with the specific requirements of IFRS are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Company's financial position and financial performance;

   --      make judgements and estimates that are reasonable and prudent; and 
   --      make an assessment of the Company's ability to continue as a going concern. 

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors have overall responsibility for the maintenance and integrity of the corporate and financial information included on the Company's website.

Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' responsibility statement

In accordance with the UKLA's DTRs, each of the Directors, whose names are set out on page 28 confirms that to the best of his or her knowledge that:

-- the annual report and financial statements have been prepared in accordance with IFRS, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

-- the strategic report, including the Directors' report, includes a fair and balanced review of the development and performance of the business, and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces.

The annual report and financial statements, taken as a whole, is considered by the Board to be fair, balanced and understandable, and provides the information necessary for shareholders to assess the Company's position, performance, business model and strategy.

By order of the Board

Alex Ohlsson

Chairman

12 April 2017

Colin Huelin

Director

12 April 2017

INDEPENT AUDITOR'S REPORT

To the members of GCP Asset Backed Income Fund Limited

Our opinion

In our opinion, the financial statements give a true and fair view of the financial position of GCP Asset Backed Income Fund Limited (the "Company") as at 31 December 2016, and of its financial performance and its cash flows for the period then ended in accordance with International Financial Reporting Standards and have been properly prepared in accordance with the requirements of the Companies (Jersey) Law 1991.

What we have audited

The Company's financial statements comprise:

   --      the statement of financial position as at 31 December 2016; 
   --      the statement of comprehensive income for the period then ended; 
   --      the statement of changes in equity for the period then ended; 
   --      the statement of cash flows for the period then ended; and 

-- the notes to the financial statements, which include a summary of significant accounting policies.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing ("ISAs"). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Company in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants ("IESBA Code"). We have fulfilled our other ethical responsibilities in accordance with the IESBA Code.

Our audit approach

Materiality

   --      Overall materiality was GBP3.2 million, which represents 2% of net assets. 

Audit scope

-- The Company is based in Jersey and the financial statements include its investments in Subsidiaries as financial assets through profit or loss, in accordance with the IFRS 10 requirements for investment companies.

-- Our audit work was performed solely in Jersey and included the audit of the financial statements of the Company.

-- We tailored the scope of our audit taking into account the types of investments within the Company, the involvement of the third parties and the accounting processes and controls.

Key audit matters

   --      Valuation of investments. 
   --      Acquisition of investments. 

Audit scope

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered where the Directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into account the structure of the Company, the accounting processes and controls, and the industry in which the Company operates.

Materiality

The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall Company materiality for the financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

Overall Company materiality

GBP3.2 million

How we determined it

2% of net assets

Rationale for the materiality benchmark

We believe that net assets is the most appropriate benchmark because this is the key metric of interest to investors. It is also a generally accepted measure used for companies in this industry.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above 5% of overall materiality, being GBP160,000 as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

 
Key audit matter                      How our audit addressed 
                                       the key audit matter 
------------------------------------  ------------------------------------- 
Valuation of investments               Our audit procedures with 
 in Subsidiaries                        respect to the valuation 
 Refer to page 37 (Audit                of underlying loans included, 
 Committee report), page                understanding the controls 
 62 (note 12 to the financial           over the process and approval 
 statements) and page 67                of the valuation. 
 (note 17 to the financial              We evaluated the competency 
 statements).                           of the Company's external 
 The valuation of investments           valuation agent in the context 
 in Subsidiaries drives a               of their ability to generate 
 number of key performance              a reliable estimate of the 
 indicators, such as Net                fair value, by assessing 
 Asset Value, which is of               their professional qualifications, 
 significant interest to                experience and independence 
 investors and the market.              from the Company. 
 The fair value of the investment       We held discussions with 
 in Subsidiaries is derived             the external valuation agent 
 from the fair value of the             and considered if the findings 
 underlying loans to the                are consistent with the 
 end borrower.                          results of the audit work 
 The valuations are performed           we performed. 
 using contractual cash flows           We communicated directly 
 generated by each loan facility        with the Investment Manager 
 over a medium to long-term             to understand the monitoring 
 period and by selecting                process of the borrowers' 
 key assumptions such as                payments and financial performance, 
 the discount rate and macroeconomic    in identifying circumstances 
 assumptions such as inflation,         that can materially impact 
 interest and tax rates.                the recoverability of the 
 The nature of the discounted           contractual cash flows. 
 cash flow is inherently                We agreed a sample of the 
 subjective due to key assumptions      contractual cash flows used 
 used for the discount rate             in the discounted cash flow 
 and the amount or timing               to the contractual payment 
 of cash flows supporting               schedule of the loan facility 
 the interest and capital               agreements and checked the 
 repayments on debt positions           mathematical accuracy of 
 held.                                  the discounted cash flow 
 The existence of significant           calculation. We challenged 
 estimation uncertainty,                the assumptions used in 
 coupled with the fact that             the valuations model. 
 small percentage differences           We considered the adequacy 
 in assumptions to the valuations       of the Company's disclosures 
 when aggregated could result           in respect of the fair value 
 in material misstatement,              of the unlisted investments, 
 are the reasons for our                specifically the estimates 
 specific audit focus and               and judgements taken by 
 attention to this area.                the Company in arriving 
                                        at the fair value of the 
                                        unlisted investments. We 
                                        also considered the disclosure 
                                        of the degree of sensitivity 
                                        when a reasonably possible 
                                        change in a key assumption 
                                        could give rise to a change 
                                        in the fair value of the 
                                        unlisted investments. 
                                        Based on the above procedures, 
                                        we found the fair values 
                                        adopted by the Company and 
                                        the disclosures to be appropriate 
                                        and the assumptions used 
                                        to be supportable and within 
                                        a reasonable range. 
------------------------------------  ------------------------------------- 
 
 
Acquisition of investments        Our audit procedures with 
 Refer to page 62 and 63           respect to the acquisition 
 (note 12 to the financial         of the new underlying loans 
 statements).                      included understanding the 
 During the period, the Company    controls over the process 
 has acquired 14 new secured       and approval of the new 
 loan notes to the value           loan notes. 
 of GBP157,797,000 through         For the new loan notes advanced 
 its wholly owned subsidiaries.    during the period, we tested 
 The acquisition of the new        the movement to facility 
 Secured Loan Notes were           agreements, note certificates 
 the most prominent investment     and cash payments. 
 activity for the Company          For the loan notes repaid 
 during the year and represents    during the period, we tested 
 a significant balance on          the movement to facility 
 the statement of financial        agreements and cash payments. 
 position, as a result this        We tested the existence 
 was an areas of audit focus.      of the loans to independent 
                                   confirmations from the entities 
                                   to which loan has been advanced 
                                   to confirm the outstanding 
                                   balance at period end. 
                                   Based on the above procedures, 
                                   no differences were identified 
                                   by our testing which required 
                                   reporting to those charged 
                                   with governance. 
-------------------------------  --------------------------------- 
 

Other information

The Directors are responsible for the other information. The other information comprises all sections of the introduction, strategic report, corporate governance statement, statement of Directors' responsibilities, glossary of key terms and Company information (but does not include the financial statements and our Auditor's report thereon).

Other than as specified in our report, our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In our opinion the information given in the Directors' report is consistent with the financial statements and the information given in the corporate governance statement set out on pages 30 to 35 in the annual report with respect to internal control and risk management systems is consistent with the financial statements.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information; we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the financial statements

The Directors are responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards, the requirements of Jersey Law and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

-- identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;

-- obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control;

-- evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors;

-- conclude on the appropriateness of the Directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern; and

-- evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our Auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on other legal and regulatory requirements

Under the Companies (Jersey) Law 1991 we are required to report to you if, in our opinion:

   --      we have not received all the information and explanations we require for our audit; 
   --      proper accounting records have not been kept; or 
   --      the financial statements are not in agreement with the accounting records. 

We have no exceptions to report arising from this responsibility.

We have nothing to report in respect of the following matters which we have reviewed:

-- the Directors' report set out on page 42 to 46 in relation to going concern. As noted in the Directors' report, the Directors have concluded that it is appropriate to adopt the going concern basis in preparing the financial statements. The going concern basis presumes that the Company has adequate resources to remain in operation, and that the Directors intend it to do so, for at least one year from the date the financial statements were signed. As part of our audit we have concluded that the Directors' use of the going concern basis is appropriate. However, because not all future events or conditions can be predicted, these statements are not a guarantee as to the Company's ability to continue as a going concern;

-- the Directors' statement that they have carried out a robust assessment of the principal risks facing the Company and the Directors' statement in relation to the longer-term viability of the Company. Our review was substantially less in scope than an audit and only consisted of making inquiries and considering the Directors' process supporting their statements; checking that the statements are in alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the statements are consistent with the knowledge acquired by us in the course of performing our audit; and

-- the part of the Corporate Governance Statement relating to the Company's compliance with the ten further provisions of the UK Corporate Governance Code specified for our review.

This report, including the opinion, has been prepared for and only for the members as a body in accordance with Article 113A of the Companies (Jersey) Law 1991 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Karl Hairon

For and on behalf of PricewaterhouseCoopers CI LLP

Chartered Accountants and Recognized Auditor

Jersey, Channel Islands

12 April 2017

STATEMENT OF COMPREHENSIVE INCOME

For the period 7 September 2015 to 31 December 2016

 
                                                     Period 
                                                      ended 
                                                31 December 
                                                       2016 
                                        Notes       GBP'000 
--------------------------------------  -----  ------------ 
Income 
Net income/gains on financial assets 
 at fair value through profit or loss       3         9,029 
Arrangement fee income                      3           729 
Interest income                             3           121 
--------------------------------------  -----  ------------ 
Total income                                          9,879 
--------------------------------------  -----  ------------ 
Expenses 
Investment management fees                 18       (1,154) 
Directors' remuneration                     6         (108) 
Operating expenses                          4       (1,007) 
--------------------------------------  -----  ------------ 
Total expenses                                      (2,269) 
--------------------------------------  -----  ------------ 
Total operating profit before finance 
 costs                                                7,610 
--------------------------------------  -----  ------------ 
Finance costs 
Finance income                              7           685 
Finance expense                             8       (1,084) 
--------------------------------------  -----  ------------ 
Total profit and comprehensive income                 7,211 
--------------------------------------  -----  ------------ 
Basic earnings per share (pence)           11          6.91 
--------------------------------------  -----  ------------ 
Diluted earnings per share (pence)         11          6.12 
--------------------------------------  -----  ------------ 
 

All items in the above statement are derived from continuing operations.

STATEMENT OF FINANCIAL POSITION

As at 31 December 2016

 
                                                         As at 
                                                   31 December 
                                                          2016 
                                           Notes       GBP'000 
-----------------------------------------  -----  ------------ 
Current assets 
Financial assets at fair value through 
 profit or loss                               12       158,418 
Other receivables and prepayments             13           140 
Cash and cash equivalents                     14         6,819 
-----------------------------------------  -----  ------------ 
Total assets                                           165,377 
-----------------------------------------  -----  ------------ 
Current liabilities 
Other payables and accrued expenses           15         (803) 
-----------------------------------------  -----  ------------ 
Total liabilities                                        (803) 
-----------------------------------------  -----  ------------ 
Net assets                                             164,574 
-----------------------------------------  -----  ------------ 
Capital and reserves 
Share capital                                 16       162,597 
Retained earnings                                        1,977 
-----------------------------------------  -----  ------------ 
Total capital and reserves                             164,574 
-----------------------------------------  -----  ------------ 
Ordinary shares in issue                      16   164,612,083 
-----------------------------------------  -----  ------------ 
NAV per ordinary share (pence per share)                   100 
-----------------------------------------  -----  ------------ 
 

Signed and authorised for issue on behalf of the Board of Directors

Mr Alex Ohlsson Mr Colin Huelin

   Director                   Director 
   12 April 2017           12 April 2017 

STATEMENT OF CHANGES IN EQUITY

For the period 7 September 2015 to 31 December 2016

 
                                           Share   Retained     Total 
                                         capital   earnings    equity 
                                 Notes   GBP'000    GBP'000   GBP'000 
-------------------------------  -----  --------  ---------  -------- 
At 7 September 2015                            -          -         - 
-------------------------------  -----  --------  ---------  -------- 
Total profit and comprehensive 
 income for the period                         -      7,211     7,211 
-------------------------------  -----  --------  ---------  -------- 
Equity shares issued                16   165,039          -   165,039 
Share issue costs                   16   (2,442)          -   (2,442) 
Dividends paid                      10         -    (5,234)   (5,234) 
-------------------------------  -----  --------  ---------  -------- 
At 31 December 2016                      162,597      1,977   164,574 
-------------------------------  -----  --------  ---------  -------- 
 

STATEMENT OF CASH FLOWS

For the period 7 September 2015 to 31 December 2016

 
                                                             Period 
                                                              ended 
                                                        31 December 
                                                               2016 
                                                Notes       GBP'000 
----------------------------------------------  -----  ------------ 
Cash flows from operating activities 
Total operating profit before finance 
 costs                                                        7,610 
Unrealised gain on financial asset at 
 fair value through profit or loss                 12         (620) 
Increase in other payables and accrued 
 expenses                                          15           803 
Increase in other receivables and prepayments      13         (140) 
Investment in Subsidiaries                       17.7     (159,602) 
Capital repayments from Subsidiaries             17.7         1,804 
----------------------------------------------  -----  ------------ 
Net cash flow used in operating activities                (150,145) 
----------------------------------------------  -----  ------------ 
Cash flows from financing activities 
Proceeds from issue of ordinary shares             16       121,638 
Ordinary share issue costs                         16       (2,442) 
Proceeds from issue of C shares                    16        44,086 
C share issue costs                                16       (1,084) 
Dividends paid                                     10       (5,234) 
----------------------------------------------  -----  ------------ 
Net cash flow generated from financing 
 activities                                                 156,964 
----------------------------------------------  -----  ------------ 
Net increase in cash and cash equivalents                     6,819 
Cash and cash equivalents at beginning                            - 
 of the period 
----------------------------------------------  -----  ------------ 
Cash and cash equivalents at end of 
 the period                                        14         6,819 
----------------------------------------------  -----  ------------ 
Net cash generated in operating activities 
 includes: 
Interest received from deposits                                 121 
Loan interest received from Subsidiaries                      8,409 
----------------------------------------------  -----  ------------ 
 

NOTES TO THE FINANCIAL STATEMENTS

For the period 7 September 2015 to 31 December 2016

1. General information

The Company is a registered public company incorporated and domiciled in Jersey on 7 September 2015, with registration number 119412. The Company is governed by the Companies Law and the CIF Law.

The Company is a closed-ended investment company incorporated under the laws of Jersey. The ordinary shares (and the C shares when in issue) of the Company are listed on the LSE's Main Market.

On 12 October 2016, the Company changed its name from Project Finance Investments Limited to GCP Asset Backed Income Fund Limited following shareholder approval at the 2016 AGM.

The Company makes its investments through its wholly owned Subsidiaries, by subscribing for the Secured Loan Notes issued by the Subsidiaries, who on-lend the funds to an end borrower. At the period end, the Subsidiaries comprise GABI UK, a private limited company incorporated in the UK on 23 October 2015 (registration number 9838893) and GABI Housing, a private limited company incorporated in the UK on 25 November 2016 (registration number 10497254). The Company, through its Subsidiaries, seeks to make investments in a diversified portfolio of projects which have contracted predictable medium to long-term cash flows and/or physical assets, such investments being asset backed lending. The asset backed debt investments are mainly in the form of medium to long- term fixed or floating rate loans which are secured against or comprised contracted cash flows and/or physical assets which are predominantly UK based. Where possible, investments are structured to benefit from partial inflation protection.

2. Significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied throughout the period presented.

2.1 Basis of preparation

The annual report and financial statements for the period 7 September 2015 to 31 December 2016 have been prepared on a going concern basis in accordance with IFRS issued by IASB and interpretations issued by IFRIC as approved by IASC, which remain in effect. The annual report and financial statements give a true and fair view of the Company's affairs and comply with the requirements of the Companies Law.

The annual report and financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities held at fair value through profit or loss. The financial report and financial statements are presented in Pound Sterling and all values have been rounded to the nearest thousand pounds (GBP'000) except where otherwise indicated.

In accordance with the investment entities exemption contained in IFRS 10 (Consolidated Financial Statements) the Directors have determined that the Company meets the definition of an investment entity and as a result the Company is not required to prepare consolidated financial statements. The Company measures its investment in its Subsidiaries at fair value and it is treated as a financial asset through profit or loss in the statement of financial position (refer to note 2.3).

The Company raised its initial capital on 23 October 2015 through a placing of ordinary shares, and raised further capital through the issue of C shares on 31 May 2016 and a placing of ordinary shares on 10 November 2016. The C shares converted into ordinary shares on 18 October 2016 in accordance with the C share prospectus. When in issue, the net assets attributable to the C share class are accounted for and managed by the Company as a distinct pool of assets, with the Company ensuring that separate cash accounts are created and maintained. Invested C share capital is managed as a distinct pool by the Company, whereas expenses are either specifically invoiced to the individual share class or split proportionally to the NAV of each share class (refer to note 16). Under IFRS, equity capital raised by way of the issuance of C shares is treated as debt for accounting purposes.

New standards, amendments and interpretations

There are a number of new standards and amendments to existing standards which have been published that are mandatory for the Company's accounting periods beginning after 1 January 2016 or later periods, which the Company has decided not to early adopt. The following are the most relevant to the Company:

-- Amendment to IAS 1 (Presentation of Financial Statements) - amendments 1 January 2016 resulting from the disclosure initiative;

-- IFRS 7 (Financial Instruments) Disclosures: amendments regarding additional hedge accounting disclosures (applied when IFRS 9 is applied);

-- IFRS 9 (Financial Instruments) effective for annual periods beginning on or after 1 January 2018;

-- IFRS 15 (Revenue from Contracts with Customers) was issued in May 2014 and applies to an annual reporting period beginning in or after 1 January 2018; and

-- IFRS 16 (Leases) was issued in January 2016 and is effective for annual periods beginning on or after 1 January 2019.

In addition to the above, there are no new IFRS or IFRIC interpretations that are effective that would be expected to have a material impact on the Company's annual report and financial statements.

Going concern

The Directors have made an assessment of the Company's ability to continue as a going concern and are satisfied that the Company has the resources to continue in business for the foreseeable future. Furthermore, the Directors are not aware of any material uncertainties that may cast significant doubt upon the Company's ability to continue as a going concern. Therefore, the financial information has been prepared on a going concern basis. In addition to a going concern statement, the Directors have undertaken a longer term assessment of the Company, the result of which can be seen on page 27 in the viability statement.

2.2 Significant accounting estimates and assumptions

The preparation of financial statements, in accordance with IFRS, requires the Directors to make estimates and assumptions that affect the reported amounts recognised in the financial statements. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability in the future.

Fair value of instruments not quoted in an active market

The Subsidiaries' assets consist of investments held by the Subsidiaries and loan notes issued to the Company. The fair value of the Subsidiaries' investments are not quoted in an active market and therefore the fair value is determined using a discounted cash flow methodology adjusted as appropriate for market, credit and liquidity risk factors, refer to notes 17.3, 17.5 and 17.6 respectively.

The investments held by the Subsidiaries are valued by a third-party Valuation Agent on a quarterly basis using the discounted cash flow methodology.

The models used by the Valuation Agent use observable data to the extent practicable. However, areas such as credit risk (both own and counterparty), volatilities and correlations require estimates to be made. Changes in assumptions about these factors could affect the reported fair value of financial instruments.

The determination of what constitutes "observable" requires significant judgement by the Company. The Company considers observable data to be market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

The investment in Subsidiaries is held at fair value through profit or loss with income distributions and interest payments from the Subsidiaries included as part of the fair value movement calculation together with any unrealised movement in the fair value of the holding in the Subsidiaries.

2.3 Significant judgements

2.3 (a) Assessment as an investment entity

The Directors have concluded that the Company meets the definition of an investment entity.

Entities that meet the definition of an investment entity within IFRS 10 (Consolidated Financial Statements) are required to measure their Subsidiaries at fair value through profit or loss rather than consolidate. The criteria which defines an investment entity are as follows:

-- an entity that obtains funds from one or more investors for the purpose of providing those investors with investment services;

-- an entity that commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and

-- an entity that measures and evaluates the performance of substantially all of its investments on a fair value basis.

The Directors have concluded that the Company has met the additional characteristics of an investment entity, in that it indirectly holds a portfolio of investments by investing in Subsidiaries which hold a portfolio of investments; the Company's ownership interest in the investment entity is in the form of equity. The Company has more than one investor and its investors are not related parties, other than those disclosed in note 18.

The Company reports to its investors via quarterly investor information, and to its management, via internal management reports, on a fair value basis. All investments are reported at fair value in the Company's reports to the extent allowed by IFRS.

The Company has two wholly owned Subsidiaries as at 31 December 2016. The investments in the Subsidiaries are valued at fair value through profit or loss and are not consolidated, in accordance with IFRS 10 (Consolidated Financial Statements).

2.3 (b) Functional and presentation currency

The primary objective of the Company is to generate returns in Pound Sterling, its capital-raising currency. The Company's performance is evaluated in Pound Sterling. Therefore, the Directors consider Pound Sterling as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions.

2.3 (c) Segmental information

The Directors view the operations of the Company as one operating segment, being the investment in the Subsidiaries, which are registered UK companies. All significant operating decisions are based upon analysis of the Subsidiaries' investments as one segment. The financial results from this segment are equivalent to the financial results of the Company as a whole, which are evaluated regularly by the Directors.

The following table analyses the Company's operating income per geographical location. The basis for attributing the operating income is the place of incorporation of the counterparty.

 
                        Period 
                         ended 
                   31 December 
                          2016 
                       GBP'000 
----------------  ------------ 
Channel Islands            121 
United Kingdom           9,758 
----------------  ------------ 
Total                    9,879 
----------------  ------------ 
 

Significant shareholders are disclosed in the Directors' report on page 42.

3. Operating income

The table below analyses the Company's operating income per investment category:

 
                                                     Period 
                                                      ended 
                                                31 December 
                                                       2016 
                                                    GBP'000 
---------------------------------------------  ------------ 
Net income/gains on financial assets at fair 
 value through profit or loss                         9,029 
Arrangement fee income                                  729 
Interest income                                         121 
---------------------------------------------  ------------ 
Total                                                 9,879 
---------------------------------------------  ------------ 
 

The table below analyses the operating income derived from the Company's financial assets at fair value through profit or loss:

 
                                                     Period 
                                                      ended 
                                                31 December 
                                                       2016 
                                                    GBP'000 
---------------------------------------------  ------------ 
Loan interest realised                                8,409 
---------------------------------------------  ------------ 
Unrealised gain on investments at fair value 
 through profit and loss                                664 
Unrealised loss on investments at fair value 
 through profit and loss                               (44) 
---------------------------------------------  ------------ 
Total                                                 9,029 
---------------------------------------------  ------------ 
 
 
 Accounting policy 
  Interest income and interest expense other than 
  interest received on financial assets held at fair 
  value through profit or loss are recognised on 
  an accruals basis in the statement of comprehensive 
  income. 
  Net movement in fair value of financial assets 
  at fair value through profit or loss includes changes 
  in the fair value of the investment in the Subsidiaries 
  held at fair value through profit or loss. 
  Arrangement fee income comprises fees relating 
  to the issue and set up of Secured Loan Notes, 
  as detailed in note 18. The Investment Manager 
  is entitled to receive from the Company an arrangement 
  fee of up to 1% of the cost of each investment 
  made by the Company. To the extent any arrangement 
  fee negotiated by the Investment Manager with a 
  borrower exceeds 1%, the benefit of any such excess 
  shall be paid to the Company. 
--------------------------------------------------------- 
 

4. Operating expenses

 
                                           Period 
                                            ended 
                                      31 December 
                                             2016 
                                          GBP'000 
-----------------------------------  ------------ 
Administration and depositary fees            270 
AIFMD fees                                     28 
Audit fees                                     55 
Bank charges                                    1 
Broker's fees                                  58 
Compliance fees                                13 
Directors' insurance                           27 
FATCA fees                                      4 
Financial advisory fees                         8 
Legal and professional fees                   240 
Printing fees                                  17 
Public relations fees                          30 
Registrar's fees                               38 
Regulatory fees                                 8 
Stock exchange announcement fees                7 
Stock exchange listing fee                     13 
Sundry expenses                                18 
Valuation agent fees                          172 
-----------------------------------  ------------ 
Total                                       1,007 
-----------------------------------  ------------ 
 
 
 Accounting policy 
  Operating and investment management expenses in 
  the statement of comprehensive income are recognised 
  on an accruals basis. 
------------------------------------------------------ 
 

5. Auditor's remuneration

 
                                  Period 
                                   ended 
                             31 December 
                                    2016 
                                 GBP'000 
--------------------------  ------------ 
Audit fees                           100 
Non-audit related fees(1)             70 
--------------------------  ------------ 
Total                                170 
--------------------------  ------------ 
 

(1) The Auditor provided non-audit related services during the period in the form of services provided as reporting accountant during the IPO of the ordinary shares and the subsequent issue of C shares. A fee of GBP45,000 was charged in relation to the issue of the ordinary shares, a fee of GBP20,000 was charged in relation to the issue of the C shares in the period and a fee of GBP5,000 was charged in relation to the conversion of the C shares to ordinary shares in the period, refer to note 16 and pages 38 to 39 of the Audit Committee report.

6. Directors' remuneration

The Directors of the Company were remunerated as follows:

 
                            Period 
                             ended 
                       31 December 
                              2016 
                           GBP'000 
--------------------  ------------ 
Alex Ohlsson                    38 
Colin Huelin                    36 
Joanna Dentskevich              32 
Directors' expenses              2 
--------------------  ------------ 
Total                          108 
--------------------  ------------ 
 

7. Finance income

 
                                              Period 
                                               ended 
                                         31 December 
                                                2016 
                                             GBP'000 
--------------------------------------  ------------ 
Return on C share financial liability            685 
--------------------------------------  ------------ 
Total                                            685 
--------------------------------------  ------------ 
 
 
 Accounting policy 
  Finance income in the statement of comprehensive 
  income represents the return on the conversion 
  of the C shares, refer to note 16. The return on 
  the C shares represents an increase in the net 
  assets attributable to the C shares over and above 
  the funds raised from their issue. 
---------------------------------------------------- 
 

8. Finance expenses

 
                                            Period 
                                             ended 
                                       31 December 
                                              2016 
                                           GBP'000 
------------------------------------  ------------ 
Amortisation of C share issue costs          1,084 
------------------------------------  ------------ 
Total                                        1,084 
------------------------------------  ------------ 
 
 
 Accounting policy 
  Finance expense in the statement of comprehensive 
  income comprises the C share amortisation and commitment 
  fees which are expensed in the period they occur. 
  The C shares issued during the period represented 
  contracts for conversion into a variable number 
  of ordinary shares and therefore the C shares were 
  classified as liabilities under IFRS. The classification 
  resulted in the C share issue costs being presented 
  as finance costs in the statement of comprehensive 
  income. 
---------------------------------------------------------- 
 

9. Taxation

Profits arising in the Company for the period 7 September 2015 to 31 December 2016 are subject to tax at the standard rate of 0% in accordance with the Income Tax Law.

10. Dividends

 
                                                           Period 
                                                            ended 
                                              Pence   31 December 
                                                per          2016 
                                              share       GBP'000 
-------------------------------------------  ------  ------------ 
First interim dividend paid on 25 May 
 2016                                          1.32         1,399 
Second interim dividend paid on 22 
 August 2016                                   1.50         1,590 
Third interim dividend paid on 22 November 
 2016                                          1.50         2,245 
-------------------------------------------  ------  ------------ 
Dividends paid during the period               4.32         5,234 
Fourth interim dividend paid on 21 
 February 2017                                 1.50         2,469 
-------------------------------------------  ------  ------------ 
Total                                          5.82         7,703 
-------------------------------------------  ------  ------------ 
 

As the fourth interim dividend was declared after the period end, it is not accrued as a provision in the financial statements.

 
 Accounting policy 
  In accordance with the Company's Articles, in respect 
  of the ordinary shares and the C shares when in 
  issue, the Company will distribute the income it 
  receives to the fullest extent that is deemed appropriate 
  by the Directors. Dividends due to the Company's 
  shareholders are recognised when they become payable. 
  The Company intends to pay dividends on a quarterly 
  basis with dividends declared in January, April, 
  July and October and paid in February, May, August 
  and November in each financial year. 
----------------------------------------------------------- 
 

11. Earnings per share

Basic earnings per share are calculated by dividing profit for the period attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue during the period. Diluted earnings per share are calculated by dividing the profit attributable to ordinary equity holders by the diluted weighted average number of ordinary shares, which includes the C shares issued in the period up to the date of conversion based on their value at issue.

 
                                                 Weighted 
                                                  average 
                                                   number 
                                                       of   Pence 
                                      Profit     ordinary     per 
                                     GBP'000       shares   share 
----------------------------------  --------  -----------  ------ 
Period ended 31 December 2016 
Basic earnings per ordinary share      7,211  104,289,872    6.91 
----------------------------------  --------  -----------  ------ 
Diluted earnings per ordinary 
 share                                 7,211  117,735,270    6.12 
----------------------------------  --------  -----------  ------ 
 

12. Financial assets at fair value through profit or loss: Investment in Subsidiaries

The Company's financial assets consist solely of the investment in Subsidiaries, which represent amounts advanced to finance the Group's investment portfolio. The Company's investment in Subsidiaries as at 31 December 2016 comprised:

 
                                            Investment    Unrealised  Fair value 
                                               at cost   gain/(loss)     GBP'000 
                                               GBP'000       GBP'000 
------------------------------------------  ----------  ------------  ---------- 
Debt 
Secured Loan Notes up to GBP1,000,000,000      157,797           427     158,224 
------------------------------------------  ----------  ------------  ---------- 
Equity 
GABI UK ordinary share - representing 
 1 ordinary share (GBP1)                             -           237         237 
GABI Housing ordinary shares - 
 representing 1,000 ordinary shares 
 (GBP1 each)                                         1          (44)        (43) 
------------------------------------------  ----------  ------------  ---------- 
Total investment in Subsidiaries               157,798           620     158,418 
------------------------------------------  ----------  ------------  ---------- 
 

The above represents a 100% interest in the Subsidiaries.

Secured Loan Notes

GABI UK has issued a loan note instrument to the Company for a programme of up to GBP1 billion variable funding notes limited to the cash available by the Company. Each series of loan notes issued has a maximum nominal amount, fixed at the date of issue, a base amount and a subscribed amount. The loan notes are secured and listed on the TISE (formerly the Channel Islands Securities Exchange).

 
      Accounting policy 
       The Company classifies its financial assets into 
       the categories below in accordance with IAS 39 
       (Financial Instruments: Recognition and Measurement). 
       This category consists of financial instruments 
       that have been designated at fair value through 
       profit or loss upon initial recognition. These 
       financial assets are designated on the basis that 
       they are part of a group of financial assets which 
       are managed and have their performance evaluated 
       on a fair value basis, in accordance with the risk 
       management and investment strategies of the Company, 
       as set out in the prospectus dated 20 January 2017. 
       The financial information about the financial assets 
       of the Company is provided by the Investment Manager 
       to the Directors with the valuation model being 
       supplied by the Valuation Agent. 
       The Company recognises a financial asset when, 
       and only when, it becomes a party to the contractual 
       provisions of the instrument. Purchases or sales 
       of financial assets that require delivery of assets 
       within the time frame generally established by 
       regulation or convention in the marketplace are 
       recognised on the trade date, i.e. the date that 
       the Company commits to purchase or sell the asset. 
       A financial asset (or, where applicable a part 
       of a financial asset or part of a group of similar 
       financial assets) is derecognised where: 
 
        *    the rights to receive cash flows from the asset have 
             expired; or 
 
 
        *    the Company has transferred its rights to receive 
             cash flows from the asset or has assumed an 
             obligation to pay the received cash flows in full 
             without material delay to a third party under a 
             pass-through arrangement; and 
 
 
        *    either (a) the Company has transferred substantially 
             all the risks and rewards of the asset, or (b) the 
             Company has neither transferred nor retained 
             substantially all the risks and rewards of the asset, 
             but has transferred control of the asset. 
 
 
       When the Company transfers its rights to receive 
       cash flows from an asset or has entered into a 
       pass-through arrangement, and has neither transferred 
       nor retained substantially all the risks and rewards 
       of the asset nor transferred control of the asset, 
       the asset is recognised to the extent of the Company's 
       continuing involvement in the asset. 
       Financial assets at fair value through profit or 
       loss are recorded in the statement of financial 
       position at fair value. All transaction costs for 
       such instruments are recognised directly in the 
       statement of comprehensive income. 
       After initial measurement, the Company measures 
       financial instruments which are classified at fair 
       value through profit or loss at fair value. Subsequent 
       changes in the fair value of those financial instruments 
       are recorded in the statement of comprehensive 
       income. 
       Fair value is the price that would be received 
       to sell an asset in an orderly transaction between 
       market participants at the measurement date. For 
       all other financial instruments not traded in an 
       active market, the fair value is determined by 
       using appropriate valuation techniques. Valuation 
       techniques include using recent arm's length market 
       transactions, referenced to appropriate current 
       market data, and discounted cash flow analysis, 
       at all times making as much use of available and 
       supportable market data as possible. 
       An analysis of fair values of financial instruments 
       and further details as to how they are measured 
       are provided in note 17.7. 
------------------------------------------------------------------ 
 

13. Other receivables and prepayments

 
                   31 December 
                          2016 
                       GBP'000 
-----------------  ----------- 
Arrangement fees           117 
Prepayments                 23 
-----------------  ----------- 
Total                      140 
-----------------  ----------- 
 
 
 Accounting policy 
  Other receivables and prepayments are recognised 
  and carried at the lower of their original invoiced 
  value and recoverable amount. Where the time value 
  of money is material, receivables are carried at 
  amortised cost. 
  A provision for impairment is made when there is 
  objective evidence that the Company will not be 
  able to recover balances in full. Balances are 
  written off when the probability of recovery is 
  assessed as being remote. 
----------------------------------------------------- 
 

14. Cash and cash equivalents

 
                            31 December 
                                   2016 
                                GBP'000 
--------------------------  ----------- 
Cash and cash equivalents         6,819 
--------------------------  ----------- 
Total                             6,819 
--------------------------  ----------- 
 
 
 Accounting policy 
  Cash and cash equivalents in the statement of financial 
  position and statement of cash flows comprise cash 
  on hand, demand deposits, short-term deposits in 
  banks with original maturities of three months 
  or less and short-term, highly liquid investments 
  that are readily convertible to known amounts of 
  cash and which are subject to an insignificant 
  risk of changes in value. 
--------------------------------------------------------- 
 

15. Other payables and accrued expenses

 
                              31 December 
                                     2016 
                                  GBP'000 
----------------------------  ----------- 
Investment management fees            359 
Amounts due to Subsidiaries           233 
Accruals                              211 
----------------------------  ----------- 
Total                                 803 
----------------------------  ----------- 
 
 
 Accounting policy 
  Other payables and accrued expenses are recognised 
  initially at fair value and subsequently stated 
  at amortised cost using the effective interest 
  method where appropriate. 
---------------------------------------------------- 
 

16. Authorised and issued share capital

 
                                                         31 December 
                                                 Number         2016 
Share capital                                 of shares      GBP'000 
------------------------------------------  -----------  ----------- 
Ordinary shares issued at no par value 
 and fully paid 
Shares issued upon incorporation at 
 7 September 2015                                     2            - 
Issued in the period                        120,964,734      121,638 
Shares issued upon conversion of C shares    43,647,347       43,401 
------------------------------------------  -----------  ----------- 
Total shares issued                         164,612,083      165,039 
Share issue costs                                     -      (2,442) 
------------------------------------------  -----------  ----------- 
At 31 December 2016                         164,612,083      162,597 
------------------------------------------  -----------  ----------- 
 

The Company's share capital is represented by ordinary shares and C shares when in issue. Quantitative information about the Company's capital is provided in the statement of changes in equity.

The authorised share capital of the Company on incorporation was represented by an unlimited number of no par value ordinary shares.

On 7 September 2015, the Company was incorporated with two ordinary shares issued to the Investment Manager. These shares continue to be owned by the Investment Manager.

On 23 October 2015, the Company issued 106,000,000 new ordinary shares following its IPO.

On 24 May 2016, the Company announced the issue of 44,086,270 C shares, issued at 100 pence per share. C shares are no par value shares. The C shares were listed on the Main Market of the LSE and dealing in the C shares commenced on 31 May 2016.

On 18 October 2016, the Company issued 43,647,347 new ordinary shares following the conversion of the C shares on the basis of a conversion ratio of 0.9901 ordinary shares for every C share held. After conversion of the C shares to ordinary shares, the C shares were delisted on 18 October 2016.

On 8 November 2016, the Company announced the issue of 14,964,734 ordinary shares following a placing. The ordinary shares were listed on the Main Market of the LSE and dealing commenced on 10 November 2016.

As at 31 December 2016, the Company's issued share capital comprised 164,612,083 ordinary shares, none of which were held in treasury.

The ordinary shares carry the right to dividends out of the profits available for distribution as determined by the Board. Each holder of an ordinary share is entitled to attend meetings of shareholders and, on a poll, to one vote for each share held. When in issue, the C shares carry the right to receive notice of, attend and vote at general meetings of the Company and, on a poll, to one vote for each C share held.

C share financial liability

 
                                                    31 December 
                                                           2016 
                                                        GBP'000 
--------------------------------------------------  ----------- 
Proceeds from the issue of C shares                      44,086 
Issue costs                                             (1,084) 
--------------------------------------------------  ----------- 
Net proceeds from C shares                               43,002 
--------------------------------------------------  ----------- 
Amortisation of C share issue costs                       1,084 
Return on C share financial liability                     (685) 
--------------------------------------------------  ----------- 
Extinguishment of C share liability on conversion 
 to ordinary shares                                    (43,401) 
--------------------------------------------------  ----------- 
Value of C shares at period end                               - 
--------------------------------------------------  ----------- 
 

The tables below give a summary of the results of the C share pool up to the date of conversion and value of the C share pool assets on the date of conversion:

For the period from issue to conversion

 
                                              GBP'000 
--------------------------------------------  ------- 
Proceeds from the issue of C shares            44,086 
C share issue costs                           (1,084) 
Deposit interest income                            17 
Change in fair value on financial assets at 
 fair value through profit or loss                381 
Arrangement fee income                            168 
Administration expenses                         (167) 
--------------------------------------------  ------- 
Value of C shares on conversion                43,401 
--------------------------------------------  ------- 
 
 
                                                       30 September 
                                                               2016 
                                                            GBP'000 
-----------------------------------------------------  ------------ 
Represented by the following assets and liabilities: 
Financial assets held at cost                             26,890(1) 
Trade and other receivables                                     551 
Cash and cash equivalents                                    16,078 
Other payables and accrued expenses                           (118) 
-----------------------------------------------------  ------------ 
Value of C shares on conversion                              43,401 
-----------------------------------------------------  ------------ 
 

1. Following an announcement made by the Company on 3 October 2016, in respect of investment completions of GBP16.8 million, the Company had invested substantially all of the proceeds of the C share issue and consequently the conversion of C shares occurred on 14 October 2016.

 
 Accounting policy 
  Upon issuance of equity shares, the consideration 
  received is included in equity. 
  Transaction costs incurred by the Company in issuing, 
  acquiring or reselling its own equity instruments 
  are accounted for as a deduction from equity to 
  the extent that they are incremental costs directly 
  attributable to the equity transaction that otherwise 
  would have been avoided. 
  No gain or loss is recognised in the statement 
  of comprehensive income in respect of the purchase, 
  sale, issuance or cancellation of the Company's 
  own equity instruments. 
  In accordance with IFRS, C shares were recognised 
  on issue as a liability at fair value, less directly 
  attributable transaction costs. After initial recognition 
  C shares were measured at amortised cost using 
  the effective interest method. Amortisation was 
  credited or charged to finance income or finance 
  costs in the statement of comprehensive income. 
  Transaction costs were amortised up until the conversion 
  point. 
  The C shares were converted into ordinary shares 
  once at least 90% of all the assets representing 
  the net proceeds or such other percentage as the 
  Board and Investment Manager agreed had been invested 
  in accordance with the Company's investment policy 
  or, if earlier, six months after the date of issue 
  of the C shares. On conversion, each holder of 
  C shares received such number of ordinary shares 
  as equalled the number of C shares held by them 
  multiplied by the NAV per C share and divided by 
  the NAV per ordinary share, in each case as at 
  a date shortly prior to conversion. 
----------------------------------------------------------- 
 

17. Financial instruments

The table below sets out the classifications of the carrying amounts of the Company's financial assets and financial liabilities into categories of financial instruments.

 
                                                31 December 
                                                       2016 
Financial assets                                    GBP'000 
----------------------------------------------  ----------- 
Cash and cash equivalents                             6,819 
Other receivables and prepayments                       140 
Loans and receivables                                 6,959 
----------------------------------------------  ----------- 
Financial assets at fair value through profit 
 or loss                                            158,418 
----------------------------------------------  ----------- 
Total                                               165,377 
----------------------------------------------  ----------- 
Financial liabilities 
Other payables and accrued expenses                     803 
----------------------------------------------  ----------- 
Financial liabilities measured at amortised 
 cost                                                   803 
----------------------------------------------  ----------- 
 

17.1 Capital management

The Company is wholly funded from equity balances, comprising issued ordinary share capital as detailed in note 16.

The Company may seek to raise additional capital from time to time to the extent that the Directors and the Investment Manager believe the Company will be able to make suitable investments. The Company raises capital only when it has a clear view of a robust pipeline of highly advanced investment opportunities to ensure the rapid deployment of capital.

As detailed in the Company's prospectus dated 20 January 2017, the Company may borrow up to 25% of its NAV as at such time any such borrowings are drawn down. During the period the Company did not have a debt facility.

17.2 Financial risk management objectives

The Company has an investment policy and strategy as summarised within its prospectus dated 20 January 2017, that sets out its overall investment strategy and its general risk management philosophy and has established processes to monitor and control these in a timely and accurate manner. These guidelines are the subject of regular operational reviews undertaken by the Investment Manager to ensure that the Company's policies are adhered to as it is the Investment Manager's duty to identify and assist in the management of risk. The Investment Manager reports regularly to the Directors who have ultimate responsibility for the overall risk management approach.

The Investment Manager and the Directors ensure that all investment activity is performed in accordance with investment guidelines. The Company's investment activities expose it to various types of risks that are associated with the financial instruments and markets in which it invests. Risk is inherent in the Company's activities and it is managed through a process of ongoing identification, measurement and monitoring. The financial risks to which the Company is exposed include market risk, interest rate risk, credit risk and liquidity risk.

As explained in note 2.3, the Company's financial assets at fair value through profit or loss are investments in the Subsidiaries. The Subsidiaries are a holding vehicle used solely to hold the Company's investments and therefore, the market risk, interest rate risk, credit risk and liquidity risk is highly dependent on the performance of the Subsidiaries' investments.

17.3 Market risk

The investments that the Company holds in the Subsidiaries are valued based on the NAV of the Subsidiaries.

The Subsidiaries' portfolio of assets is held at fair value, and their values are monitored on a quarterly basis by the Valuation Agent. There is a risk that market movements may decrease or increase the value of the Company's assets without regard to the assets underlying performance.

The Valuation Agent considers the movements in comparable credit markets and publicly available information around each project in assessing the expected future cash flows from each of the Subsidiaries' investments.

The valuation principles used are based on a discounted cash flow methodology. A fair value for each asset acquired by the Company is calculated by applying a relevant market discount rate to the contractual cash flow expected to arise from each asset.

The Valuation Agent determines the discount rate that it believes the market would reasonably apply to each underlying investment taking, inter alia, into account the following significant inputs:

   --      Pound Sterling interest rates; 
   --      movements of comparable credit markets; and 
   --      observable yield on other comparable instruments. 
   --      In addition, the following are also considered as part of the overall valuation process: 
   --      market activity and investor sentiment; and 
   --      changes to the economic, legal, taxation or regulatory environment. 

The Valuation Agent exercises its judgement in assessing the expected future cash flows from each investment. Given that the investments of the Company are generally fixed income debt instruments (in some cases with elements of inflation protection) or other investments with a similar economic effect, the focus of the Valuation Agent is on assessing the likelihood of any interruptions to the debt service payments, in light of the operational performance of the underlying asset.

The valuations are reviewed by the Investment Manager and the Directors and the subsequent NAV is reviewed by the Investment Manager and the Directors on a quarterly basis.

The key driver of the Subsidiaries' NAV is the valuation of their portfolio of Secured Loan Notes.

The table below shows how changes in discount rate affect the changes in the valuation of the Secured Loan Notes (refer to note 12):

 
31 December 2016 
 Change in discount rate               (0.50%)     0.00%    0.50% 
------------------------------------  --------  --------  ------- 
Value of financial assets at fair 
 value (GBP'000)                       162,989   158,224  153,680 
Change in value of financial assets 
 at fair value (GBP'000)                 4,765         -  (4,544) 
------------------------------------  --------  --------  ------- 
 

17.4 Interest rate risk

Interest rate risk arises from the effects of fluctuations in the prevailing level of market interest rates on the fair value of financial assets and liabilities, future cash flows and borrowings.

Interest rate risk has the following effect:

Fair value of financial assets and liabilities

Interest rates are one of the factors which the Valuation Agent takes into account when valuing the financial assets.

Future cash flows

The Company primarily invests, via its Subsidiaries, in a diversified portfolio of projects which have contracted predictable medium to long-term cash flows and/or physical assets, such investments being asset-backed. The Company's investments will predominantly be in the form of medium to long-term fixed or floating rate loans which are secured against cash flows and/or physical assets which are predominantly UK based.

Interest rate hedging may be carried out to seek to provide protection against falling interest rates in relation to assets that do not have a minimum fixed rate of return acceptable to the Company in line with its investment policy and strategy. The Company has not entered into an interest rate hedging agreement in the period.

Cash is held at a number of financial institutions to spread interest rate risk and credit risk. Cash awaiting investment is currently held on behalf of the Company at banks carrying a minimum rating of A-2, P-2 or F-2 from Standard and Poor's, Moody's and Fitch respectively.

Borrowings

During the period, the Company did not have a debt facility. As disclosed in note 20, the Company entered into a two-year GBP15 million revolving credit facility with Royal Bank of Scotland International Limited post period end.

17.5 Credit risk

Credit risk refers to the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. Credit risk is generally higher when a non-exchange traded financial instrument is involved because the counterparty is not an exchange clearing house. The assets classified at fair value through profit or loss do not have a published credit rating, however the Investment Manager monitors the financial position and performance of the Project Companies on a regular basis to ensure that credit risk is appropriately managed.

The Company is exposed to differing levels of credit risk on all its assets. Per the statement of financial position, the Company's total exposure to credit risk is GBP165.4 million represented by its cash, receivables and investment assets.

As noted in section 17.4 above, cash is held at a number of financial institutions to spread credit risk.

The Company's investment assets are debt and equity securities in the Subsidiaries and therefore, the credit risk of the Company's investment assets is highly dependent on the performance of the Subsidiaries' investment portfolios, which are valued on a quarterly basis by the Valuation Agent. The Valuation Agent takes into account the credit risk associated with these investments when valuing the financial assets.

Credit risk is considered by the Valuation Agent during both the origination process and at quarterly valuation updates. Depending on the nature of the underlying projects and the extent to which due diligence was originally performed, residual credit risk is considered by reference to a number of factors including, but not limited to: relative benchmark analysis, comparable bond pricing, market analysis such as the capital asset pricing model, and fundamental credit analysis of a borrower's underlying performance by reference to any applicable loan covenants.

After an investment is made, the forecasts are regularly updated with information provided by the Project Companies in order to monitor ongoing financial performance. In addition, the credit risk associated with each Project Company is mitigated because the cash flows receivable are secured either on a senior or subordinated basis over the assets of the Project Company, which in turn have security over the assets of the underlying projects. As at period end, the concentration of credit risk to any Project Company did not exceed 20% of the Company's total assets.

The Directors currently consider the fair value of the financial instruments at par plus accumulated interest to be reasonable. The impact of such fair value attributable to any change in credit risk will continue to be reviewed at each quarter end and specifically when investments mature and their ongoing performance can be assessed. Therefore, no additional sensitivity analysis to that disclosed in note 17.3 has been provided in this respect.

17.6 Liquidity risk

Liquidity risk is the risk that the Company may not be able to generate sufficient cash resources to settle its obligations in full as they fall due or can only do so on terms that are materially disadvantageous. The Company ensures it maintains adequate reserves by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. During the period ended 31 December 2016, all investments made by the Company were funded solely by proceeds from the IPO, the C share equity raise and the placing.

The financial assets held at fair value through profit or loss are predominantly the investments in the Subsidiaries. Such investments would take time to realise and there is no assurance that the valuations placed on the investments would be achieved from any such sale process. As at 31 December 2016, the Company holds GBP6.8 million in cash and cash equivalents, which are readily available and does not have any financial liabilities aside from the standard trade payables and accrued expenses totalling GBP0.8 million arising from the normal course of business, which are all due within the year.

The Directors assessment of the Company's ability to continue as a going concern, noted in note 2.1, included an assessment of liquidity risk. The Board concluded that the Company will be able to generate sufficient cash resources to settle its obligations in full as they fall due. Therefore no additional sensitivity analysis to liquidity risk has been provided in this respect.

17.7 Fair values of financial assets and liabilities

Basis of determining fair value

The Valuation Agent carries out quarterly fair valuations of the financial assets of the Subsidiaries and the Secured Loan Notes. These valuations are reviewed by the Investment Manager and the subsequent NAV is reviewed by the Investment Manager and Directors on a quarterly basis.

Fair value measurements

Investments measured and reported at fair value are classified and disclosed in one of the following fair value hierarchy levels depending on whether their fair value is based on:

   --      Level 1: quoted prices in active markets for identical assets or liabilities; 

-- Level 2: inputs other than quoted prices included in level one that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) or;

-- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

-- An investment is always categorised as Level 1, 2 or 3 in its entirety. In certain cases the fair value measurement for an investment may use a number of different inputs that fall into different levels of the fair value hierarchy. In such cases, an investment level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgement and is specific to the investment.

The table below summarises all securities held by the Company based on the fair valuation technique adopted.

 
Financial asset 
 measured at fair                             Level     Level     Level 
 value through profit             Date of         1         2         3     Total 
 or loss:                       valuation   GBP'000   GBP'000   GBP'000   GBP'000 
---------------------------  ------------  --------  --------  --------  -------- 
                              31 December 
Investment in Subsidiaries           2016         -         -   158,418   158,418 
---------------------------  ------------  --------  --------  --------  -------- 
 

The Directors have classified the financial instruments as Level 3 due to the limited number of comparable and observable market transactions in this sector. The current input for the Level 3 at period end is the discount rate for these investments which are considered to be primarily modelled rather than market observed. The debt securities that the Subsidiaries have invested in are also classified as Level 3.

The following table shows a reconciliation of all movements in the fair value of financial instruments categorised within Level 3 between the beginning and end of the period:

 
                                                31 December 
                                                       2016 
                                                    GBP'000 
----------------------------------------------  ----------- 
Opening balance                                           - 
Investment in Subsidiaries                          159,602 
Capital repayments from Subsidiaries                (1,804) 
Unrealised gains on investments at fair value 
 through profit or loss                                 620 
----------------------------------------------  ----------- 
Closing balance                                     158,418 
----------------------------------------------  ----------- 
 

Included within the investment in Subsidiaries figure of GBP159,602,000 is an amount of unpaid share capital of GBP1,000 relating to the investment in GABI Housing, which is outstanding as at 31 December 2016.

For the Company's financial instruments categorised as Level 3, changing the discount rate used to value the underlying instruments alters the fair value. As noted in note 17.3 in determining the discount rate for calculating the fair value of financial assets at fair value through profit or loss, reference is made to Pound Sterling interest rates, movements of comparable credit markets and observable yield on comparable instruments. Hence, movements in these factors could give rise to changes in the discount rate. A change in the discount rate used to value the Level 3 investments would have the effect on profit before tax as shown in the table in note 17.3.

The fair value of the investment in the Subsidiaries consists of both debt (the Secured Loan Notes) and equity (1,001 ordinary shares), refer to note 12.

The investments that the Company holds in the Subsidiaries are valued based on the NAV of the Subsidiaries. As at 31 December 2016, the Subsidiaries NAVs were as follows:

 
               31 December 
                      2016 
                   GBP'000 
-------------  ----------- 
GABI UK                237 
GABI Housing          (43) 
-------------  ----------- 
Total                  194 
-------------  ----------- 
 

The Secured Loan Notes that the Company has subscribed for, are valued on a discounted cash flow basis in line with the model used by the Valuation Agent, which is also applied to the underlying investments of GABI UK shown below:

 
                                                                    Key 
                         Fair value                        unobservable 
                            GBP'000  Valuation technique         inputs  Range 
-----------------------  ----------  -------------------  -------------  ----- 
Financial assets 
 at fair value through                   Discounted cash       Discount 
 profit or loss             158,224                 flow           rate  6-10% 
-----------------------  ----------  -------------------  -------------  ----- 
Total                       158,224 
-----------------------  ----------  -------------------  -------------  ----- 
 

Refer to note 17.3 for the sensitivity analysis performed in relation to fair value of the investment in the Subsidiaries.

The Directors review the quarterly valuation report provided by the Valuation Agent which includes reference to the inputs used in the valuation of investments and the appropriateness of their classification in the fair value hierarchy. In particular, the Directors are satisfied that the significant inputs into the derivation of the discount rate adopted by the Valuation Agent are pursuant to the Valuation Agent engagement letter as set out within the prospectus dated 20 January 2017. Should the valuation approach change causing an investment to meet the characteristics of a different level of the fair value hierarchy, it will be reclassified accordingly.

During the period there were no transfers of investments between levels therefore no further disclosure is considered necessary under IFRS.

18. Related party disclosures

As defined by IAS 24 (Related Party Disclosures), parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. Subsidiary companies are also deemed to be related parties as they are members of the same group of companies.

Directors

The non-executive Directors of the Company are considered to be the key management personnel of the Company. Directors' remuneration for the period (including reimbursement of Company related expenses) totalled GBP107,719. As at 31 December 2016, liabilities in respect of these services amounted to GBP19,481. The Directors did not receive any performance based fees in the period. As at 31 December 2016, the Directors of the Company hold directly or indirectly, and together with their family members, 109,700 ordinary shares in the Company.

Alex Ohlsson is the managing partner of Carey Olsen, the Company's Jersey legal advisers. Carey Olsen has provided legal services to the Company during the period. Carey Olsen maintains procedures to ensure that Mr Ohlsson has no involvement in the delivery of legal services to the Company.

During the period, the aggregate sum of GBP90,367 was paid to Carey Olsen in respect of legal work undertaken in respect of the incorporation of the Company, the IPO, the variable funding note programme, the C share raise, the placing, the 2016 AGM and the change of name of the Company.

Investment Manager

The Company is party to an investment management agreement with the Investment Manager, pursuant to which the Company has appointed the Investment Manager to provide discretionary portfolio and risk management services relating to the assets on a day-to-day basis in accordance with its investment objectives and policies, subject to the overall control and supervision of the Directors.

For its services to the Company, the Investment Manager receives an investment management fee which is calculated and paid quarterly in arrears at an annual rate of 0.9% per annum of the prevailing NAV of the Company less the value of the cash holdings of the Company pro rata for the period for which such cash holdings have been held.

During the period, the Company expensed GBP1,154,328 in respect of investment management and advisory fees. Additional arrangement fees amounting to GBP185,000 were paid to the Investment Manager in relation to the issuance of the C shares. As at 31 December 2016, liabilities in respect of these services amounted to GBP359,065.

The Investment Manager receives an annual fee of GBP22,500 in relation to its role as the Company's AIFM. During the period, the Company expensed GBP28,000 in respect of AIFMD fees due to the Investment Manager. As at 31 December 2016, liabilities in respect of these services amounted to GBP5,656.

The Investment Manager, at its discretion, is entitled to an arrangement fee of up to 1% of the cost of each investment made by the Subsidiaries. The Investment Manager typically expects the cost of any such fee to be covered by the borrowers, and not the Company, and which may be paid by borrowers through the Subsidiaries. To the extent any arrangement fee negotiated by the Investment Manager with a borrower exceeds 1%; the benefit of any such excess is paid to the Company.

Subsidiaries

As at 31 December 2016, the Company owns a 100% controlling stake in the Subsidiaries. The Subsidiaries are considered to be a related party by virtue of being part of the same group.

The tables below disclose the transactions and balances between the Company and Subsidiaries:

 
                                31 December 
                                       2016 
Transactions                        GBP'000 
------------------------------  ----------- 
Intercompany income received 
GABI UK 
Arrangement fee income                  729 
Loan interest income received         8,409 
------------------------------  ----------- 
Total                                 9,138 
------------------------------  ----------- 
 
 
                                                   31 December 
                                                          2016 
Balances                                               GBP'000 
-------------------------------------------------  ----------- 
Intercompany balances due 
GABI UK                                                  (232) 
GABI Housing                                               (1) 
-------------------------------------------------  ----------- 
Total                                                    (233) 
-------------------------------------------------  ----------- 
Intercompany loan balance within book cost 
 of financial asset at fair value through profit 
 or loss 
GABI UK - Secured Loan Notes                           157,797 
-------------------------------------------------  ----------- 
 

19. Reconciliation of NAV

 
                                        31 December 
                                               2016 
                                            GBP'000 
--------------------------------------  ----------- 
Valuation per NAV calculation               164,625 
Adjustments                                    (51) 
--------------------------------------  ----------- 
Valuation as per financial statements       164,574 
--------------------------------------  ----------- 
 

20. Subsequent events after the report date

On 4 January 2017, the Company transferred 1,000 shares in GABI Housing to GABI UK. These shares were transferred to a third party, Mr David Rae Wylde Limited on 20 January 2017.

On 13 January 2017, the Company entered into a two-year GBP15 million revolving credit facility with Royal Bank of Scotland International Limited. Interest on amounts drawn under the facility is charged at LIBOR plus 2.75% per annum. A commitment fee is payable on undrawn amounts. The total costs incurred to establish the facility was GBP375,759 (including an arrangement fee of GBP300,000).

On 27 January 2017, GBP5.3 million was drawn on the facility which was repaid in full on 20 February 2017.

On 13 January 2017, the Company agreed a GBP3.1 million extension to the GBP10.8 million social infrastructure loan facility. The revised GBP13.9 million facility, which will be issued in tranches, is secured on a senior basis against the underlying units and leases and is subject to upward-only principal indexation.

On 10 February 2017, the Company issued 79,250,000 C shares at 100 pence per share by way of an open offer, placing and offer for subscription, raising gross proceeds of GBP79.25 million. Issue costs incurred as part of the capital raise were GBP1.6 million.

On 10 March 2017, the Company announced two loans of up to GBP17.5 million to finance UK residential property. The first loan of up to GBP15 million, with a term of c.three years, will be secured on a subordinated ranking basis and issued in tranches with an initial amount advanced of GBP5.3 million. The second loan of GBP2.5 million is to provide asset-backed finance to a specialist lender active in the UK short-term finance market. The facility is secured on a senior basis. These loans have been funded from the net proceeds of the Company's recent issue of C shares.

On 24 March 2017, the Company committed to a loan of up to GBP7 million which will be used to finance a portfolio of buy-to-let mortgages. The loan has a term of c.three years, will be secured on a subordinated ranging basis and issued in tranches with an initial amount of c.GBP3.8 million. The loan has been funded from the net proceeds of the Company's recent issue of C shares.

21. Ultimate controlling party

It is the view of the Board that there is no ultimate controlling party.

GLOSSARY OF KEY TERMS

 
ACA                       Associate of the Chartered Institute of Accountants 
AGM                       The Annual General Meeting of the Company 
AIF                       Alternative Investment Fund 
AIFM                      Alternative Investment Fund Manager 
AIFMD                     Alternative Investment Fund Managers Directive 
Articles                  The Articles of Association of GCP Asset Backed Income Fund Limited 
C shares                  The C shares of GCP Asset Backed Income Fund Limited 
CET1                      Common Equity Tier 1 
CIF Law                   Collective Investment Funds (Jersey) Law 1988 
Companies Law             Companies (Jersey) Law 1991, as amended 
The Company               GCP Asset Backed Income Fund Limited 
DTRs                      Disclosure Guidance and Transparency Rules of the UKLA 
FATCA                     Foreign Account Tax Compliance Act 
FCA                       Financial Conduct Authority 
FRC                       Financial Reporting Council 
GABI Housing              GABI Housing Limited 
GABI UK                   GCP Asset Backed Income (UK) Limited 
GCP Infrastructure        GCP Infrastructure Investments Limited 
Group                     The Company and the Subsidiaries 
IASB                      International Accounting Standards Board 
IASC                      International Accounting Standards Committee 
IESBA Code                International Ethics Standards Board for Accountants Code of Ethics for Professional 
                          Accountants 
IFRIC                     International Financial Reporting Interpretations Committee 
IFRS                      International Financial Reporting Standards 
Income Tax Law            Income Tax (Jersey) Law 1961, as amended 
IPO                       Initial public offering 
IRR                       Internal rate of return 
ISA                       International Standards on Auditing 
LSE                       London Stock Exchange 
LTV                       Loan-to-value 
MAR                       EU Market Abuse Regulation 
NAV                       Net asset value 
Ordinary shares           The ordinary shares of GCP Asset Backed Income Fund Limited 
Project Company           A special purpose company which owns and operates an asset 
Secured Loan Notes        Loan notes issued to the Company 
The Subsidiaries          GABI UK and GABI Housing 
TISE                      The International Stock Exchange 
Total shareholder return  The sum of the percentage increase return in the ordinary share price plus, dividends deemed 
                           to be reinvested on the dividend payment date 
UK                        United Kingdom 
UK Code                   The UK Corporate Governance Code 
UKLA                      United Kingdom Listing Authority 
 

COMPANY INFORMATION

The Company

GCP Asset Backed Income Fund Limited

12 Castle Street

St Helier

Jersey JE2 3RT

Directors and/or the Board

Alex Ohlsson (Chairman)

Colin Huelin

Joanna Dentskevich

Administrator, secretary and

registered office of the Company

Capita Financial Administrators (Jersey) Limited

12 Castle Street

St Helier

Jersey JE2 3RT

Advisers on English law

Gowling WLG (UK) LLP

4 More London Riverside

London SE2 2AU

Advisers on Jersey law

Carey Olsen

47 Esplanade

St Helier

Jersey JE1 0BD

Depositary

Capita Trust Company (Jersey) Limited

12 Castle Street

St Helier

Jersey JE2 3RT

Financial adviser and broker

Cenkos Securities plc

6.7.8 Tokenhouse Yard

London EC2R 7AS

Financial PR

Buchanan Communications

107 Cheapside

London EC2V 6DN

Independent Auditor

PricewaterhouseCoopers CI LLP

37 Esplanade

St Helier

Jersey JE1 4XA

Investment Manager and AIFM

Gravis Capital Partners LLP

53/54 Grosvenor Street

London W1K 3HU

Operational bankers

Royal Bank of Scotland International Limited

71 Bath Street

St Helier

Jersey JE4 8PJ

Santander International

19-21 Commercial Street

St Helier

Jersey JE4 8XG

Barclays Private Client International Limited

13 Library Place

St Helier

Jersey JE4 8NE

Registrar

Capita Registrars (Jersey) Limited

12 Castle Street

St Helier

Jersey JE2 3RT

Valuation Agent

Mazars LLP

Tower Bridge House

St Katharine's Way

London E1W 1DD

The Subsidiaries

GCP Asset Backed Income (UK) Limited

Munro House

Portsmouth Road

Cobham KT11 1PP

GABI Housing Limited

Munro House

Portsmouth Road

Cobham KT11 1PP

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR BIGDSGUBBGRD

(END) Dow Jones Newswires

April 13, 2017 02:00 ET (06:00 GMT)

1 Year Gcp Asset Backed Income Chart

1 Year Gcp Asset Backed Income Chart

1 Month Gcp Asset Backed Income Chart

1 Month Gcp Asset Backed Income Chart

Your Recent History

Delayed Upgrade Clock